Comment author:a_gramsci
30 October 2011 03:52:37PM
11 points
[-]
What happens in that situation is that people continue to invest in malaria nets, so much that the marginal cost of saving another life goes from say, $500 to $700, and for $600 dollars you can dig a well, saving another persons life. In essence, you donate to the most efficient charity until that money has caused the charity to have to pay more to save lives, and therefore stops being the most efficient charity.
Comment author:Vaste
17 January 2012 04:18:29PM
3 points
[-]
I've thought about this problem before, but in the context of peer peer-to-peer file sharing.
The problem is that everyone is acting independent and with limited knowledge. It's hard to know what other people are choosing. There may also be long delays between you and others paying and the cost changing.
Say that the optimal outcome is that out of $1000M, $200M is spent on insect nets and $800M on wells, and that you can only donate to one charity (too bothersome or high transaction costs or something). Now, if everyone is rational they are going to donate to the wells, and no one to nets. This is a suboptimal outcome. It'd also be difficult to coordinate the millions of people donating, so that just the right amount choose nets instead of wells. A solution to such coordination is to roll a dice. If everyone makes a random selection and lets the probability of choosing nets be 2/10ths then the expected outcome is just what we want.
Now, you can adjust this to how many (you think) are playing like yourselves. E.g. if you know most people are going to give to wells, perhaps it'd be better if you put higher probability on nets (perhaps 100%).
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What happens in that situation is that people continue to invest in malaria nets, so much that the marginal cost of saving another life goes from say, $500 to $700, and for $600 dollars you can dig a well, saving another persons life. In essence, you donate to the most efficient charity until that money has caused the charity to have to pay more to save lives, and therefore stops being the most efficient charity.
I've thought about this problem before, but in the context of peer peer-to-peer file sharing.
The problem is that everyone is acting independent and with limited knowledge. It's hard to know what other people are choosing. There may also be long delays between you and others paying and the cost changing.
Say that the optimal outcome is that out of $1000M, $200M is spent on insect nets and $800M on wells, and that you can only donate to one charity (too bothersome or high transaction costs or something). Now, if everyone is rational they are going to donate to the wells, and no one to nets. This is a suboptimal outcome. It'd also be difficult to coordinate the millions of people donating, so that just the right amount choose nets instead of wells. A solution to such coordination is to roll a dice. If everyone makes a random selection and lets the probability of choosing nets be 2/10ths then the expected outcome is just what we want.
Now, you can adjust this to how many (you think) are playing like yourselves. E.g. if you know most people are going to give to wells, perhaps it'd be better if you put higher probability on nets (perhaps 100%).