Linking projects and markets

Sat, 15 Jul 2006 00:33:38 -0700
business, market

(updated 11 Nov 2011: added Kickstarter)

(updated 5 Nov 2008: added the list section)

Stefan Kooths, Markus Langenfurth, and Nadine Kalwey wrote, (PDF) "Without a price signal, it remains unclear whether development time spent in Project A would create greater utility if spent in Project B. The traditional economic view of software, in which it is a nonrival good among users, therefore only applies to existing software, that is, from an (economically less interesting) ex post perspective. However, whenever the issue is about using scarce resources for the production of new software, competition among potential future users definitely exists if they are faced with the choice of having to do without the new Software A so that the alternative Software B can be programmed, or vice versa (ex ante rivalry). Markets can easily solve this conflict through the price mechanism, while other coordination processes fail in this aspect as they are unable to valuate and consequently compare A and B due to the lack of pricing."

Signal is a good thing. Direct participation by users in peer production is one way to get it, a software deficiency market might turn out to be another, and Seth Schoen pointed me to The private provision of public goods via dominant assurance contracts by Alexander Tabarrok. See also Assurance contract on Wikipedia.

List of tools for connecting projects and markets

Challenge awards, such as the Longitude prize or the DARPA Urban Challenge.

Kickstarter is an all-or-nothing fundraising site. If a proposed project gets enough offers of funding, it receives the entire amount. If it does not meet the goal, it gets nothing.

Tom W. Bell's "SPEX", in Prediction Markets for Promoting the Progress of Sciences and the Useful Arts. (See also a thread discussing the paper on the FSB mailing list.)

Alex Tabarrok: The Private Provision of Public Goods Via Dominant Assurance Contracts See also Kragen Sitaker on applying dominant assurance contracts to software projects.

Dr. Paul Harrison: The Rational Street Performer Protocol.

Chris Rasch: Wall Street Performer Protocol

Joey Hess comment on In Thrall to Scarcity by David N. Welton: "I have managed to make a modest living entirely from free software for about 7 years. I think that the scarcity I am taking advantage of is that of deep knowledge of infrastructure. The kind of knowledge that you get by writing pieces of code that become infrastructure."

Stuff that works in the real world but not yet in theory

Free software as signaling by potential employees: by participating in a product you signal that you know how to work, are willing to work, and work well with others.

Free software support as a threat used in negotiations to get a discount on competing software.