hiblick

Live in Bay Area; I've been an observer of LessWrong since the Overcoming Bias days, now wanting to get more involved.

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Why aren't assurance contracts widely used?

I think the problem (at least relative to assurance contracts, which as other repliers have noted, seem to doing okay with kickstarter and other pledging sites), is a mismatch of incentives.

The primary impetus to propose and fund a new dominant assurance contract lies with the entrepreneur, but given a choice between an assurance contract (where if the pledge fails to reach its total, everyone just gets their money back, and the entrepreneur gets nothing), and a dominance assurance contract (where if the pledge fails to reach its total, everyone gets their money back, plus a share of the entrepreneur's original stake), any entrepreneur is going to prefer the first. So it's hard to move the system from assurance contracts to dominant ones.

This might change if there's evidence that the monetary payout encourages people to fully fund more dominance assurance contracts, but that would probably rely on a non-negligible additional pay-out -- and once again, individual entrepreneurs don't have an incentive to provide big payouts just to prove out the dominant assurance theory.