Efficiency and Nash Equilibria in a Scrip System for P2P Networks

TL;DR

This paper models a scrip system in P2P networks, demonstrating how appropriate money supply ratios can optimize efficiency and promote Nash equilibria that reduce free riding, with broader implications for online systems.

Contribution

It provides a formal analysis of scrip systems in P2P networks, showing how to set money supply for optimal efficiency and equilibrium stability.

Findings

Proper scrip ratios maximize social welfare.

Scrip systems reduce free riding effectively.

Nash equilibria can be achieved with appropriate incentives.

Abstract

A model of providing service in a P2P network is analyzed. It is shown that by adding a scrip system, a mechanism that admits a reasonable Nash equilibrium that reduces free riding can be obtained. The effect of varying the total amount of money (scrip) in the system on efficiency (i.e., social welfare) is analyzed, and it is shown that by maintaining the appropriate ratio between the total amount of money and the number of agents, efficiency is maximized. The work has implications for many online systems, not only P2P networks but also a wide variety of online forums for which scrip systems are popular, but formal analyses have been lacking.