Date:  Monday,  December 14, 2009
Time:  11:45am – 1:15pm
Place:  Maxwell Dworkin 119

Speakers:  Ian Kash

Title:  Monetary Policy for Scrip Systems: Crashes, Altruists, Hoarders, Sybils and Collusion

Abstract: Scrip systems, where users pay for service with an artificial currency (scrip) created for the system, are an attractive solution to a variety of problems faced by P2P and distributed systems. Despite the interest in building scrip systems, relatively little work has been done to help answer basic design questions. For example, how much money should there be in the system? What will happen if some of the users start hoarding money? I present a game-theoretic model of a scrip system and show that this model has Nash equilibria where all agents use simple strategies known as threshold strategies. In fact, the same techniques provide an efficient method of computing these equilibria as well as the equilibrium distribution of wealth. I show how these results provide practical insights into the design of scrip systems. For example, social welfare is maximized by increasing the money supply up to the point that the system experiences a “monetary crash,” where money is sufficiently devalued that no agent is willing to perform a service. Hoarders generally decrease social welfare but, surprisingly, they also promote system stability by helping prevent monetary crashes. Furthermore, the effects of hoarders can be mitigated simply by printing more money.

This talk is based on joint work with Eric Friedman and Joe Halpern.