Lotteries As A Mechanism For Contracting Via The Internet

John Mamer, UCLA Anderson School of Management

Stevenson Hall 1300
11:00 AM - 11:50 AM

The Internet holds the promise of bringing vast computing power, currently locked up in idle computers, to bear on problems of commercial interest. Key to unleashing this computing power is the ability to contract for computing resources via the Internet. The anonymous and transient environment of the Internet poses a challenge to the design of an efficient payments system. The use of lotteries offers, instead of a small payment for each unit of computation, a small chance at a larger prize. What can be surmised about the economic efficiency of such a system as the number of participants increases without limit (and hence each individual’s contribution becomes small)?