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punishment-and-security

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There is a very article in the NY Times about how groups can profit by punishing members, in particular, by punishing free riders.

In the experiment, investigators at the University of Erfurt in Germany enrolled 84 students in the investment game and gave them 20 tokens apiece to start. In each round of the game, every participant decided whether to hold on to the tokens or invest some of them in a fund whose guaranteed profit was distributed equally among all members of the group, including the "free riders" who sat on their money. Because the profit was determined by a multiple of the tokens invested, each participant who contributed to the fund enjoyed less of a return than if the free riders had done so as well.

The tokens could be redeemed for real money at the end of the experiment.

About two-thirds of the students initially chose to play in a group that did not permit punishment. In the other group, the students had the option in each round of penalizing other players; it cost one token to dock another player three tokens. All participants could see who was contributing what as the game progressed, and could choose to switch groups before each round.

By the fifth round, about half of those who began the study in the no-penalty group had switched to the punitive one. A smaller number of students migrated in the other direction, but by Round 20 most had come back and the punishment-free community was a virtual ghost town.

Free-riders are a big problem on the Internet because they don't invest in information security and become botnets, spam-proxies, and other tools for attackers. They also raise the cost of services like Internet banking and e-commerce.

I wonder if an ISP could be established using such a model.

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