From: jim bell <jimbell@pacifier.com>
Date: Tue, 3 Sep 1996 13:06:28 +0800
To: jf_avon@citenet.net
Subject: Assassination Politics Question
Message-ID: <199609030140.SAA24561@mail.pacifier.com>
MIME-Version: 1.0
Content-Type: text/plain


At 06:10 PM 9/2/96 -0500, correspondent wrote:

>If there are more than one accurate prediction for an even, how will 
>CP Server will allocate the prizes?  What made me think of that is 
>that, only in the case of famous peoples, a very smart individual 
>might make a prediction simply out of being smart and informed.

To a first approximation, they could split the reward among the correct 
guessers. 

This is an issue that I considered in some detail a year ago, but which 
(surprisingly enough) hasn't been raised by others.  As I pointed out in AP 
part 1, it is necessary to reduce  "shotgun guesses" among people who simply 
guess a date (or many dates) and make a bet.  That's why I included the 
system of requiring the predictor to include a payment with the prediction, 
in such a way that the prediction remains anonymous while the included money 
is always paid to the AP organization.  This might initially appear to be a 
burden to the potential "guesser"/killer, but in fact if he understands the 
reason for it he'll want the system in place:  It's one of the main ways to 
avoid the situation where multiple people make guesses for a particular 
person and date, and thus it would tend to ensure that the successful 
"guessor" is the only one to make that guess.

Some of my analysis in AP part 1 was superficial and not really accurate, because  
in the example it gave, it suggested that the amount of money that would have 
to be included might be as little as 1/1000th of the reward money.    
However, chances are it'll usually be somewhat higher for this reason:  
Let's say a person does something REALLY AWFUL, such as Jeffrey Dahmer or 
another multiple murderer.  Suddenly, he goes from completely anonymous to 
Public Enemy #1.  One would suppose that if AP was operating "efficiently," 
he'd be dead in a week.  However, if indeed he's dead in a week, and you 
only have to pay 1/1000th per day to place your bet on his demise, you could 
(hypothetically) make your bet for all seven days, paying a total of 
7/1000th of the prize, and assuming the death occurred any day that week 
you'd be guaranteed to share in that prize.

But that's the problem:  You'd only _share_ in that prize, because many 
other people would get the same idea and they'd make similar bets, and the 
thing would simply turn into a Lotto-type game.  The potential killer out 
there, aware of this problem, would hesitate to make his bet under those 
circumstances, because it is almost certain he'd lose at least part of the 
prize to others.  The result would be a great deal of suspense, because 
nobody would know when somebody is actually going to place a prediction and 
carry out a killing.  The AP organization would rake in the money from all 
those bets, but the killing would be delayed and the betting public would 
become unhappy.  At some point the "prediction" donations would slow down, 
and perhaps a killer would take this as a cue to actually make his prediction.

One way to avoid this is to carefully adjust the amount of payment that's 
required with the "prediction," raising it _just_enough_ to deter all but 
"informed guessing" among people who know what's going to happen. Or, at 
least, to reduce "uninformed guessing" to a level which doesn't dramatically 
affect the fulfillment of the donations.  The problem with this is that this 
price-setting would be a lot of work, and is not likely to produce the 
"right" price.  It would be somewhat akin to the kind of central planning 
that the communists never did very well.  The problem with trying to set a 
price like this is that to do it right, requires WAY too much knowledge, 
knowledge that will often only be known by a small number of people that you 
can't identify.

Perhaps the most obvious solution is to allow the free market to decide how 
much a given prediction is worth.  In other words, the Invisible Hand of 
Adam Smith.  Instead of asking for some specific amount of money along with 
any given prediction, simply announce that along with a prediction the 
predictor ought to include some portion of digital cash, although there 
would be no minimum amount required.  Assuming the associated prediction 
turns out to be true, the reward fund will be distributed on a pro-rated 
basis, divided up based on the amount of prediction.  For example, if you're 
the killer and you include a dollar with your prediction, and I'm a random, 
guessing predictor and I include a dime, you get 1/1.1 of the reward and I 
get 0.1/1.1.  Had you included $10 with your prediction, you'd have won 
10.00/10.10, and I'd get 0.1/10.10.  

Sure, the amount a predictor included might be as little as a dime, and if 
that's the only correct prediction he'll get the entire amount of the 
reward.  But a killer would be stupid to ONLY include a dime, because 
somebody else could, likewise, include a dime per day for a prediction for a 
given person, and then he'd get half of the reward if nobody else did the 
same thing.  And since it would only cost him $0.10 per day or $36.50 per 
year for a given person, he'd be dollars ahead to do this.

It should be clear that a person who really KNEW that the target would die 
on a particular day would want to include enough digital cash to help ensure 
that he's the beneficiary of a good fraction of the reward, ideally most or 
all of it.  On the other hand, he won't want to include so much that it's 
"too much" a proportion of the reward itself, since the payment is 
non-refundable and it reduces his net reward.  The random guesser likewise 
wants to maximize his share, but unlike the killer does not have the 
specific knowledge that the death will occur on that particular day.  

With this system, the market is responsible for finding its own equilibrium 
point.  The AP organization need not decide how likely a given death is, and 
how much money to ask for.  Its job is made substantially simpler.
 

Jim Bell
jimbell@pacifier.com