Using electronic markets to achieve efficient task distribution

Abstract

The Internet was built using the efforts of a worldwide team of programmers that coordinated and competed through laissez-faire methods. Much of the effort was freely provided, or paid for by entities in a process that did not conform to normal commercial revenue-seeking or government regulatory behaviour. This points to major inefficiencies in the market for software. One inhibitor is the large search costs undertaken by managers to acquire new programmers. On the other hand, there are inherent inefficiencies in the way in which much of the free Internet software is developed. Specifically, there is no efficient way for users to direct the efforts of developers, other than by contracting for entire projects. This often results in a mismatch between development and requirement, as user communities and developer communities are sufficiently culturally different to make communication non-perfect. We propose a market-based solution that allows many users to each contribute small amounts to projects, and for the sum effect of these contributions to influence and direct the activities of programmers towards tasks that users demand. A range of solutions is presented, from a web billboard bounty market to trading exchange markets for digital financial instruments. Reputational effects, intermediaries and differentiation are considered. Relying on the existante of efficient electronic payment mechanisms and the efficiency promised by new electronic markets (both web billboard and digital financial instrument forms), we submit that the markets proposed could make small tasks more readily directable over the Internet, and could significantly enhance the efficiency of certain classes of software development.