cinema, compulsory reading

The Digital Dilemma Revisited

Quote 1: The BBC News Online today

“Jack Valenti, president of the Motion Picture Association of America, told BBC News Online earlier this year that digital piracy could become “debilitating” for the industry.

‘Digital piracy has become a real menace,’ he said. Despite the availability of pirate copies, The Matrix Reloaded has made more than $363.5m at the box office worldwide so far.

Quote 2: Brad DeLong, Speculative Microecomomics For Tomorrow’s Economy, draft, November 14, 1999 –

“The ongoing revolution in data processing and data communications technology may well be starting to undermine those basic features of property and exchange that make the invisible hand a powerful social mechanism for organizing production and distribution. The case for the market system has always rested on three implicit pillars, three features of the way that property rights and exchange worked.

Call the first feature excludability: the ability of sellers to force consumers to become buyers, and thus to pay for whatever goods and services they use.

Call the second feature rivalry: a structure of costs in which two cannot partake as cheaply as one, in which producing enough for two million people to use will cost at least twice as many of society’s resources as producing enough for one million people to use.

Call the third transparency: the ability of individuals to see clearly what they need and what is for sale, so that they truly know just what it is that they wish to buy.

All three of these pillars fit the economy of Adam Smith’s day relatively well. …

But digital data is cheap and easy to copy. … Without the relationship between producer and consumer becomes much more akin to a gift-exchange than a purchase-and-sale relationship. The appropriate paradigm then shifts in the direction of a fund-raising drive for a National Public Radio station. When commodities are not excludable then people simply help themselves. If the user feels like it he or she may make a “pledge” to support the producer. The user sends money to the producer not because it is the only way to gain the power to utilize the product, but out of gratitude and for the sake of reciprocity.

This reciprocity-driven revenue stream may well be large enough that producers cover their costs and earn a healthy profit.
Reciprocity is a basic mode of human behavior. People in the large do feel a moral obligation to tip cabdrivers and waiters. People do contribute to National Public Radio. But without excludability the belief that the market economy produces the optimal quantity of any commodity is hard to justify. Other forms of provision–public support funded by taxes that are not voluntary, for example–that had fatal disadvantages vis-a-vis the competitive market when excludability reigned may well deserve reexamination. …

[But t]he market system may well prove to be tougher than its traditional defenders have thought, and to have more subtle and powerful advantages than those that defenders of the invisible hand have usually listed.

compulsory reading, Economics, intellectual property rights, music industry

They’ll get the pricing wrong.

For at least five years. If you search my blog you will find that I have repeatedly said that all attempts to sell musical downloads will suffer from problematic price policy. Apple’s new itunes download service is no exception. True, it is probably closer than anything previously seen to actually enhancing the user experience with digital music. According to wired news,

“… opening day downloads equaled the number of songs legally downloaded over a six-month period last year.”

But it is nonetheless bereft with a pricing dilemma. A dollar a tune is not always a justifiable price, even though NY Times columnist David Pogue is ridiculing criticism of this pricing policy.

In fact, for most downloads it is clearly too much, even though things are cheaper when an entire Album is downloaded – for 10 dollars. While a tenner a disk makes downloading for some albums cheaper than your local record store, it is, on the other hand, probably a prohibitive price for DRM protected material, and, moreover, a price justifiable only due to the channel conflict with the non-digital distribution universe, which still makes it necessary to spend millions on marketing songs to people who are not interested in them anyway. It is a price only justified if the advantages of the internet, especially in the realm of marketing to a smaller, but more appropriate audience, are not exploited.

Thus, a dollar a buck can just be the beginning. People will continue to negotiate this price by using KaZaa and Grokster. Record companies will continue to try to scare unwitting conservative politicians about “the end of property” as well as send cease-and-desist letters to people sharing songs.

The big unknown variable is the political one. Will politicians be willing to understand the conventional definitions of property are just not appropriate in the digital age? Or will they allow the record industry to gain a windfall from perpetuating the economic structures of previous times for an unknown amount of time? I firmly believe that eventually, the social and economic institutions will adjust to a new reality.

But again, it is a matter of pricing. This time, a matter of the price that our information societies will be willing to pay for patrolling people’s hard drives and digitally fingreprinting their lives. Maybe US Sen. Santorum’s intervention telling homosexuals that they do not have a right to privacy came at the right time. I don’t know. But it is more important now than ever to tell people that digital privacy is an important issue. Something, many people were concerned about when it wasn’t a real issue yet, back in the 1980s.

Now that it is one, people don’t seem to realise that the same mechanism that allows to reduce the prices of individual songs could be the reason for the end of civil liberties as we know it. [ author off to pay to see a film in a real movie theatre…]

Economics, quicklink

Semi-daily discussion on Sen’s paradoxon

A neat little discussion occurring at Brad DeLong’s Semi Daily Journal, regarding the question whether Sen’s paradoxon – which basically says that it is possible to dream up utility functions which would allow liberalism and the pareto principle to be in conflict – is actually a paradoxon. And it is evolving into a real debate about the different meanings of liberalism/libertarianism. Be sure to check read the comments, at least flip through them if you don’t have two hours to spare…

compulsory reading, intellectual property rights, media, Political Theory, web 2.0

De-Merging Patriotism

Last year, Michael Wolf, a director in McKinsey�s New York office, published an article in the WSJ (here via McKinseyQuarterly) explaing that market forces – especially a sluggish advertising market and the general trend to digital distribution – would continue to pressure media companies to merge into ever larger entities. Mr Wolf’s article was triggered by a US appeals court decision to allow media companies to own both cable systems and local broadcasters in the same market, a decision which he seemingly supported on grounds of value creating synergies, while knowing very well that the media are not just one business among others –

“Critics of media concentration will now wonder how much more wheeling and dealing can go on before there are but one or two juggernauts controlling every image, syllable, and sound of information and entertainment.”

He also explained why he believed that more hierarchy would not yet pose a problem for the world –

“Actually, the industry has a long way to go yet before it reaches that point. There are more than 100 media companies worldwide, with more than $1 billion in revenues; and entertainment and media are still fragmented compared with other industries such as pharmaceuticals or aerospace.”

That was last year. Just when the whole Iraq thing started. And last year, I think I agreed with Mr. Wolf’s efficiency conclusion and pharmaceuticals analogy, arguing like he that

“[w]hile the media mogul archetype may be Charles Foster Kane, the better analogy is Jack Welch in his early GE days, in pursuit of strategic fit and maximum returns…” –

or, to make the argument more fun, along the lines of Michael Kinsley’s brilliant article “Six Degrees of America Online” (which is now premium, how surprising…).

Kinsley’s still rather useful point was that hierarchical control of today’s media conglomerates is probably not as dangerous as many may think because, well, it’s incestous and competitive at the same time. AOL owns a chunk of this parent of that joint venture with Microsoft who are in bed with Murdoch in Asia and cooperate with the state run television in Bulgaria. And never forget the promiscous EMI. Kinsley had a point. Upstream or downstream, the convergence value chain does look like a conglomerate soap opera. Or, if you prefer the same conclusion in McKinsey-speech –

For a German example of this just look at some of the people who are going to be on the ProSiebenSat1 Media oversight board once Haim Saban will have finalised his purchase of roughly 25% of the German eyeballs in early June this year. His Malibu neighbour Thomas Gottschalk, who’s a host on ZDF television, and Helmut Thoma, former CEO of RTL+, part of the Bertelsmann owned RTL group, for which he is still apparently still consulting.

But now, after seeing the enourmous power the media had in establishing what behavior is right or wrong on both sides of the transatlantic media rift, I no longer agree. Of course, it is not hierarchical control of large chunks of access to people’s brains per se that is problematic. But I’d say, it does become a huge problem if some big players succeed in setting the agenda for everyone else. Think of the American “WarNow!LetsGoAndKickSomeAss”, or its European antithesis, “NoWarEverBushIsSaddamInDisguise”.

There comes a point when deescalation is just no longer possible, when myths of reality established by the media become an imperative for themselves. When whatever could be true becomes true by pure repetition. And having more, and more smaller, media entitites will allow for a slowdown of this process.

Media is a content business where there are economies of scale primarily in the realm of risk structuring and distribution. Economics of scope primarily exist in cross-media publishing and promotion. So there are reasons for integration. But having witnessed the consequences of the described mechanism on a previously unintelligible scale, I believe efficiency considerations for media corpoations have to be looked at from a different angle if a merger is considered the appropriate therapy.

I am not proposing any policy here. But I’d say media concentration control has become more important now than ever. I am not proposing state interventionism per se – that would probably cause as many problems as it would be trying to solve – but there must be other ways to ease the economic pressures than merging. Less taxes for tv? I don’t know. But I think this is an issue that should be put on the public agenda here, there, and everywhere rather sooner than later.

Having just written this, I can already hear people scream – yeah, but what about the end of the bandwidth restriction, what about the internet, what about those amazing new context filtering technology, blogging – isn’t that offsetting the Murdochs of this world?

Hmm, well. As much as I like doing this, I’d have to say ‘blogging-schmogging‘. The internet is not as decentralised as one would believe (how many internet booksellers do you know off-hand?), and for the time being – despite all the blog-bubble-induced discussion how it is changing the face of journalism on this planent – much of blogging is predominantly a different, extremely useful, qualitative (ie, non statistical) kind of collaborative filtering (like the amazon recommendations), bringing together people – “Other people who looked at this blog also read this article in the NYTimes.” I’m not saying it can’t work.

But it cannot offset the reality shaping power of conventional publishing. At least not yet.


Laffer’s back.

This week’s “Der Spiegel” is concerned with the increasingly problematic relation between nominal tax rates and actual fiscal revenues in Germany. The Cover-wide headline asks “Why the state is asking ever more money from its citizens but gets less and less of it”? Its a good question – one with a simple theortical answer (that, at least, is something) but a fearful complexity in practice. The simple answer looks like the curve below.


It’s the famous “Laffer Curve”, named after Arthur Laffer who was the theoretical support behind Reagonomics. The relationship the curve depicts is pretty straightforward: If you increase the (overall national average) tax rate (t) from 0% the tax revenue (T) will first increase to a maximum (T*) before finally declining back to zero once the tax rate reaches 100%.

The general assumption is that taxes are a disincentive to economic activity and once a certain level of taxes is reached – where the tangent to the curve is parallel to the axis – econmic activity will either stop or be transferred to black (and therefore non-taxed) markets. In both instances, the overall effect for a tax collecting state will be declining revenues.

Thus, if a polity actually knows that it is currently on the right hand side of the Laffer curve, the only reasonable action would be to reduce taxes as it would both increase legal economic activity and the fill the coffers of the state. That’s what Reagan argued. That’s what never happened (that is, if there was any effect at all, the lag was so large attributing it to Reagan became a Republican exercise in epistemolgy in the late 1990s). As so often with a convincing and simple theoretical point, reality is not a friend of those trying to implement such a strategy. There simply is no way of really telling which tax rate would constitute a Laffer maximum.

The Laffer curve is a nice explanatory and propaganda tool, but is not actually helpful in construing useful fiscal policy.

Economics and the people making individual decisions simply are too complicated to easily devise policy around a general idea like the Laffer curve. Check this document for a more technical analysis of the curve and some implications. This is also where I found the beautiful illustrations.

So, knowing about the curve, we can suggest a closer look at tax rates as the simple theoretical answer to the question posed by “Der Spiegel”. But we also know that it is by no means clear it is the right suggestion in the fearfully complex economic reality. Too bad.

compulsory reading, web 2.0

New Economy. Does it really look that old?

Sometimes I am simply depressed to which extent indirect perception, ie the way we think about the stuff out there which we can’t sense ourselves, is shaped by people whose perceptions are themselves shaped by the very same mechanism.

Let’s face it, it’s not really the case that the amount of possible interpretations of “reality” increase proportionally with the amount of people transmitting and reshaping them. Of course, it’s probably true that some interpretations are plainly wrong and proportionality should not be expected if those we rely on to present a fair picture are actually worth their price. But I would argue that instead of mutual control and even possible cross-fertilisation we can witness a lot of autocatalytic feedbackslopes.

As soon as one possible scheme of interpretation has become predominant, it becomes indeed very difficult to argue against it. This is as true for general media, as it is for scientific paradigms. This is basically what Thomas Kuhn said about scientific progress – it’s about being on the right side of the argument at the right time, not about being right. Because there is no truth apart from what we make true. Now consider the opportunity a general media hype presents for a scientific community in search of outlets for their vision of the world. What would happen?

One possibility is the “New Economy“. Whatever the possible economic content embodied in that concept, there was a time in the late 1990s when everybody wanted to believe that humanity had indeed reached “Business 2.0” (I’d say, if anything, it should have been business 4.0, version 1 being hunting and gathering, 2 the agricultural economy, 3 industrialisation). When the bubble burst, the public felt devceived by the prophets and turned to those whose opinion had been largely ignored just a little bit earlier, those who now sensed that bashing all about “new economy” was the right thing to do (now here you realise why stock market analysts are a high risk group for schizophrenia, being obliged to do bash now and justify their earlier recommendations). I’d say, we’re still in the latter phase of dealing with the recent economic past, as, eg, this article in this week’s Economist demonstrates.

The article reviews a book written by by Stan Liebowitz, a professor of economics at the University of Texas at Dallas, “and a long-time sceptic of the view that the Internet changes all the rules…“. And it seems to cover a broad range of issues –

“the exaggerated advantages of Internet retailing over conventional retailing; the false claim that the Internet’s lower costs would give Internet firms bigger profits; the inadequacies of the broadcast-television model of advertising revenues; the poorly understood questions of copyright and digital-rights management. But the crux of the book is two chapters devoted to attacking the theory of lock-in. This was the notion that caused the biggest mistakes – and the area where many economists were most at fault.

The Economist’s author clearly believes in the last notion as the rest of the article is devoted to an explanation thereof. But I don’t. Quite to the contrary, I’d argue that the argument was (and thus is) right and that all the other problems (of business judgement) have been far more serious.

It’s not that economists have been wrong to point out that network effects are crucial for a lot of information based business models and being first to market is thus a crucial element in a business strategy. Likewise, if that is case, there is a possibilty for customer lock-in because of high switching costs which will offset the losses incurred during the roll-out phase when getting to a critical mass of customers was the most important thing. There is nothing wrong with this argument.

Liebowitz’ argument is based on a distinction between weak lock-in and strong lock-in. In the Economist’s words:

As the story was told, Internet lock-in happens largely because of network effects. When the value of a product to consumers increases with the popularity of the product, that is a network effect. (A telephone is worthless if you own the only one; the wider the network, the more useful a phone becomes.) Given strong network effects, a company that gains a big share of the market will be protected from competition from late-movers. Even a plainly better product may fail, because people, much as they may prefer it in itself, will wait for others to buy it first. The implication for business is that moving first is all-important. In refuting this, Mr Liebowitz emphasises the distinction between two kinds of lock-in. The question of compatibility is central to both. One kind of lock-in arises simply because switching to a new product involves a cost beyond the purchase price: costs of learning how to use it, for instance, or the difficulty of using it alongside products you already own. Mr Liebowitz calls this self-incompatibility, or weak lock-in. But there is also strong lock-in. This arises if a new product is incompatible with the choices of other consumers – and if, because of network effects, this external incompatibility reduces the value of the product.

The point is that weak lock-in is very common, indeed pervasive. Many new products have to overcome self-incompatibility. People do not buy a new computer every three months even though the product is improving all the time. Learning to use a new word processor is a bore; for most users, a rival has to be much better, not merely a bit better, to be worth the trouble. Note that if slightly better products are rejected because of self-incompatibility, this is not inefficient: it would be inefficient to buy such a product, incurring all the costs, unless the improvement was big enough to justify it. To repeat, weak lock-in is nothing new.

Strong lock-in is different, because of the network aspect. Strong lock-in means that consumers won’t move to a new and much better product unless a lot of others jump first. If they could somehow agree to move together, they would all be better off. But they cannot. Strong lock-in reflects a failure of co-ordination, it causes economic losses, and in theory it does create opportunities for decisive first-mover advantage. But how common is it, even in the new economy? Mr Liebowitz is forthright on this. Strong lock-in is not merely uncommon, he says, there is actually no known instance.

The lock-in literature leans heavily on just two examples: the persistence of the supposedly inferior QWERTY keyboard (see article) and the triumph of the VHS video standard over the supposedly superior Betamax. Both examples, Mr Liebowitz shows, turn out to be bogus. The QWERTY keyboard is about as fast to use as the most plausible alternatives, and VHS had important non-network advantages over Betamax – notably, longer tapes. Neither case shows strong lock-in.

OK, now let’s see – there’s about a hundred different stories out there concerning the alleged efficiency or non-efficiency of the QWERTY keyboard (which was allegedly designed to reduce typing speed because of technical issues in mechanical typewriters). Pick and choose your preferred one. And VHS? longer tapes than Betamax? From a band-length perspective Siemens’ Video 2000 was clearly the best product. I still have an eight-hour-tape somewhere. VHS is a clear example of network effects, but the explanation is not technical superiority. It was content.

Don’t ask me why but there were much more films available on VHS than on Beta or any other system. So more and more people picked VHS to be able to benefit from that choice. The more people chose it, the more attractive it became to even more late adopters. VHS is a clear example of lock-in. Strong or weak? I don’t think that dichotomic distinction is useful. There are weaker and stronger lock-ins. VHS is an example for a stronger one. Microsoft is an example for a stronger one – one could say, one with a interperson compatibility issue, as opposed to an “intra-person” compatibility issue, as the word processor example used above.

And these aren’t common effects? Think of’s recommendations, a service I have often used. They are based on a system called collaboritve filtering, which relies heavily on a critical mass of consumers. Think of p2p applications – you need a lot of people in such a service to be able to find the stuff you want. The more people find the stuff they want, the more will use the service.

Now switching file sharing applications is not particularly difficult for most users. But there’s a reason only a handful of useful filesharing applications exist at a time, some in niche markets, like Edonkey, where a lot of (pirated) movies are swapped.

You get my point. It’s not the wrong principle. It has been the wrong application which has caused financial desaster in so many cases. Network effects/rising returns and lock-in (in whichever way) are a lot more important for information based businesses than for car manufacturers. They have very limited problems of collective action, most of which have been dealt with in a legal way.

But it is important to emphasise that neither network effects nor customer lock-in are the only conditions for success in the cyber space. For some businesses they may be sufficient, but a useful product or service is still what people pay money for. As long as it is free, a lot of people will consume a lot of stuff. If they have to pay for it, things are different.

But let me say it again. The failures are not about wrong economics. But about their misapplication.

Economics, music industry

The strange story of Vivendi Universal

It’s been a while since I’ve looked at my last case in business school. But I am pretty sure, my successors today will certainly, sooner or later, be looking at a case study concerning the making and breaking of Vivendi Universal. There might even be two solutions to that case, one written back in autumn 1999, the other written in spring 2002. One praising the former CEO Jean-Marie Messier for his alleged vision of the converging digital world to come, the other one bashing him and the company he assembled before being sacked this summer as an obvious mistake. It might have been different back in the good old time, but in these days the half-life period of a given “right” business decision is probably measurable in fashion seasons.

The problem at hand is that there is no theory of the firm which could possibly make sense of what Messier did in the late 1990s. From a theoretical (economic) perspective, the conglomerate he created does not make a lot of sense – back then a lot of decisions seemed to be “driven by … naive heuristics …, or the pure seductive power of Hollywood.” (Bane, William P.; Bradley, Stephen P.; Collis, David J (1994): Winners And Losers: Industry structures in the converging world of telecommunications, computing and entertainment, good article, written back in 1997, when people still dared to admit they did not have a clue about the future…) In the end, there has been not even been a real transformation. So far even the media businesses remain largely distinct. What happened was that Messier used one company as a bank/collateral to buy others and then get rid of the original one. This process will be completed once Vivendi Universal will have divested its remaining energy and water supply assets. Jean-René Fourtou, Vivendi’s interim CEO made this strategy pretty clear at a press conference in Paris yesterday, confirming once more that “Vivendi Universal is basically an entertainment company”.

Thus, looking at the results of Messiers conquest, one can see the following three things:

  • The collateral – 41% of a profitable French utilities company, known as “Générale des Eaux” since 1853, now conducting business as Vivendi Environnement.
  • The bet – synergies, economies of scale and scope. The future value of a vertically integrated content production and distribution empire. But so far the empire is merely a bunch of still largely unrelated communications and media assets, most importantly the previously Seagram-owned Universal Entertainment group. As most acquisitions were made by share swaps, the real result of those transactions is that direct ownership of these assets has been transformed into indirect part-ownership of Vivendi Universal. The price paid for by Vivendi was, in the end, paid for hierarchical coordination of the day-to-day business conducted by the acquired companies. Eg, Vivendi board hierarchical conrol in combination with Bronfman family control of Vivendi’s board vs complete Bronfman family control in the case of Universal. But running the conglomerate proved to be a lot more difficult than anticipated. The problem in the current CEO’s own words is that ” Vivendi Universal [has] suffered a lack of management under Mr Messier and [is] ‘chronically over-diversified’.” (LINK).
  • The price paid – currently 19bn Euro debt, piled up during Messier’s conquest. It was probably necessary to oust him. Some people are good are good at conquests bad at consolidation. But that is what the new company needs most now.
  • No wonder, there is no economic explanation for this – apart from capital market imperfections. No one would have invested the amount of money Mr Messier could use to acquire the businesses he wanted in a new company. To acquire assets on the scale on which Mr Messier operated, he simply needed hierarchical control over a significant amount of financial resources. His conquest was a very expensive operation. But back in 1999/2000, a lot of overpriced companies bought other overpriced companies with their overpriced shares. No one back then thought of the possibility to wait and buy cheap after the burst. That’s the nature of a bubble. You somehow feel it’s there. But then, you would not bet on it if no one else does, would you?

    intellectual property rights

    In a nutshell: The differences between property and intellectual property.

    From Brad DeLong’s Semi Daily Journal

    David Weinberger said something very reasonable about intellectual property:

    All contending parties agree, I believe, that (1) the goal is to build a marketplace that encourages innovation and (2) that the way to do that is to let the market reward innovation. Unfortunately, to spread the value of innovation, two things have to happen that are contradictory from the market point of view: First, someone has to have a great idea for which she is rewarded. Second, you want that idea to spread and be built upon as rapidly as possible and requiring that the creator be rewarded slows down the spread. Much butting of heads ensues…

    To which David Winer replied as if Weinberger had said something really stupid:

    For crying out loud David, it’s super simple. If I build a house I can live in it as long as I want. If I want to rent out rooms I can do that too, as long as I want.

    The peculiar thing about this David Winer position–this “Mine! I thought of it! Mine! It’s my intellectual property forever! All Mine!” position–is that Winer could not hold it had he looked up and around at the intellectual property house he happens to live in. If he did so, he would notice that he has–without getting their permission or approval–used a huge amount of intellectual property thought up by other people, and has neither compensated them nor acquired from them a license to do so.

    To pick just one thing at random, there is the case of Ez-Eki-Baal and his cousin Ish-Baal, residents of Tyre in 1160 B.C. They first thought up the idea of using a stylized picture of an ox to represent the phoneme “A” (and the idea of using a bunch of other stylized pictures of other things to represent other phonemes). This invention of the “alpha-bet,” as I have been told it is called, is in the estimation of some a very important piece of intellectual property. Some commentators have even claimed that most of us use it during most of our waking hours.

    But have Ish-Baal, Ez-Eki-Baal, or their heirs received one red cent in the past century in return for other people’s appropriation and use of their intellectual property? No. Does David Winer have a valid license authorizing him to use the alphabet–to move into the intellectual property house built by Ish-Baal and Ez-Eki-Baal and trash the place? No. Has David Winer made any effort at all to identify and compensate those to whom–on his own theories about the moral obligations imposed on those who make use of intellectual property–he owes a fortune? No.

    So does he believe his own theories? It’s hard to know at what level he does. It’s genuinely hard to know what to do with people who argue that all the intellectual property they make is “Mine! All Mine! All Mine Forever!” and yet classify all the intellectual property they use as the common and free inheritance of all humanity. It’s a “heads I win, tails you lose” kind of argument…

    German Politics, oddly enough

    User’s guide to buying votes in Germany

    Ebay is definitely faster than political scientists.

    The latter still have to finally decide whether voting is rational. Actually, from a strict rational choice perspective, it isn’t. The infinitesimal decision making power of any individual vote cast in general elections does not justify the amount of resources committed to the act of voting.

    But still, people DO vote, for whichever reason. And not only do a lot of people vote, some of them also attribute a much higher value to the infinitesimal influence of an individual vote than most of us would anticipate as this story, published by Spiegel Online, about people trying to sell their right to vote on confers.

    Needless to say, it’s illegal to do so, which is why you will no longer find the auctions mentioned in the article on ebay. As soon as they’re notified about such auctions, the auctions will be blocked.

    But despite the illegality of such auctions, I wonder whether they could not become a prime research laboratory concerning questions like the one mentioned above? I would really like to know how much people would be willing to pay for the assurance of someone they have only had e-contact with to vote for their preferred party in the seclusion of the voting booth – in a month.

    Why should the sellers even think about honouring their commitment if there is no way for the buyers to check the results? It’s plain moral hazard. Which mechanisms would sellers develop to credibly bind themselves to an uncontrollable as well as unenforcable agreement? Why did they have to block these auctions? This is the stuff prime economists get their Nobel prices for.