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Barter - Mechanism Design of a Market-Incented Wisdom Exchange for Organizations and Communities

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Barter - Mechanism Design of a Market-Incented Wisdom Exchange for Organizations and Communities Barter - Mechanism Design of A Market-incented Wisdom Exchange for Organizations and Communities Dawei Shen Marshall Van Alstyne Andrew Lippman Media Laboratory Center for Digital Business Media Laboratory Massachusetts Institute of Massachusetts Institute of Massachusetts Institute of Technology Technology Technology [email protected] [email protected] [email protected] ABSTRACT been promoted both by researchers in academia and by in- We are exploring the design and creation of information mar- dustry leaders in practice [2]. Firm managers often ap- kets with a goal of bringing an electronic, distributed market preciate the critical role of knowledge management systems to a community or an organization to enhance knowledge in retaining employees' knowledge, encouraging information sharing, innovation creation, and productivity. We apply sharing and innovation creation, and enhancing work pro- innovative market mechanisms to construct incentives while ductivity, usually through the usage of `Enterprise Web 2.0' still encouraging pro-social behaviors. A key advantage of platforms. However, a discouraging fact is that more than this study will be a direct appeal to information economic 70% of KMS initiatives among U.S. organizations are under- theories and market principles on information markets de- performing mainly because of the adoption problem [12]. An sign. A web-based software platform called Barter is devel- important reason for the failure is that the incentive struc- oped and deployed at several university sites. User data have ture has not been designed and constructed properly. Mem- been collected and analyzed to test the effectiveness of an bers of an organization, e.g. firm employees, lack the incen- information market and its various forces. In this paper, we tive to participate and share information, especially in the focus on presenting the framework design of an information presence of their existing work commitment and reporting market, and demonstrating why such market architecture hierarchy. In several other cases, the competitive culture of provides a long-term sustainable incentive structure to an the organization actually dis-incentivizes its members from organization and its members. We also present in this paper sharing knowledge, either because a question or a request key findings we have learned through system deployment. might be interpreted as a signal of weakness, or because people believe sharing critical knowledge or information im- Categories and Subject Descriptors plies giving up their competitive advantages. These practi- H.4 [Information Systems Applications]: Miscellaneous; cal challenges faced by many firms, especially the ones with H.5.2 [Information Interfaces and Presentation]: Mis- competitive environments and relatively scarce resources, in cellaneous part motivated the research work presented in this paper. The concepts of KMS and internal social media are closely General Terms linked to recent research development on crowding sourc- Design, Economics, Management ing and collective intelligence. \Incentive" is considered as one of the \genes" that constitute collective intelligence[11]. Keywords However, organizations' management usually carries out in- Knowledge markets, Information markets, Mechanism de- centive design in a central-planning manner, neglecting the sign, Organizational design, Incentive design, Information power of the crowd itself in determining appropriate re- economics wards. As a result, though many organizations invest signif- icantly in incentive design when deploying an internal KMS, 1. INTRODUCTION the measures taken often fail to achieve long-term effective- 1.1 Background ness, fairness, and stability. Knowledge and innovation represent significant organiza- tional resources and directly impact organizations' success In our research, instead of building a knowledge manage- and competitiveness. A class of information systems, re- ment platform, we aim at establishing a \knowledge econ- ferred to as knowledge management systems (KMS), have omy" inside an organization. We apply market principles to the underlying mechanism in order to address the challenge of incentive design, and use the price tool to balance the supply and demand of knowledge, innovation and even user activities. In the knowledge economy, users can share in- formation, contribute innovative ideas, serve requests, etc., and get rewards that truly reflect the value of their efforts, as determined by the markets. [3] lays some of the theoret- ical foundation for designing an internal knowledge market. Quoted from this article: \Managing the information economy within the Price Theory describes how markets efficiently allocate re- firm can improve forecasting, innovation, and pro- sources across an entire economy using only private ductivity." ... \Markets cause resources to speak information. It also tells how markets supply miss- up and self-identify. Markets provide the frame- ing goods. For knowledge management, this is critical work to arbitrage the gap between problem and in getting people to produce valuable knowledge for opportunity. To get these benefits, executives others but only when this is more valuable than what must bring market forces to bear within the firm. they are already doing. It can also tell us how to value The rules, the rewards, and the running of inter- intangibles. [8]. nal markets differ from those of a hierarchy." Quantity Theory of Money or more broadly macroeco- nomic theories on monetary policies, describes how to The importance of incentive mechanism design goes beyond manage a supply of value { money, credit, and points the scope of an organization or knowledge management. { to achieve economic vitality and growth by choosing Nowadays, web and mobile platforms are pervasively used expansionary or contractionary policies. For knowl- to collect resources and wisdom from the crowd to complete edge management, this shows how to stimulate and tasks and spread information collaboratively. Incentivizing regulate trade volume in the firm's internal knowledge users to participate and contribute in such networked sys- economy[7][6]. tems has become a critical issue. For instance, the winning strategy in the DARPA Red Balloon Contest incentivized Financial markets theory provides the rules and guide- users to forward information by rewarding users along a so- lines when information products are securitized and cial path connected to the user who found the balloon [14]. exchanged on a secondary market [13]. The theory also The complexity of the incentive structure depends on the covers computerized market-making algorithms [5]. time horizon of the system's intended use. The significance of incentive mechanism design also arises In addition to the economic theories listed above, several when we develop the framework of \Open Transaction Net- other research fields also play crucial roles in the design works (OTN)"[10] [9]. In OTN, users share their personal process of an information market and determine its overall transaction histories and associated opinions in order to ex- success. For example, Natural Language Processing (NLP) plore the full social value of transaction information. A cru- is applied when we need to compare, sort or index tex- cial assumption and challenge here is that users have the tual information contents users create. Social network mod- incentive to share private information within their social net- eling and analysis techniques are instrumental in under- works, and receive benefits and rewards appropriately. standing the dynamics of social interactions and how infor- mation propagates through the network. Information pre- In this research, we focus on an organizational setting, where sentation and visualization is particularly important when management of the organization tries to design the optimal we design dashboards and gadgets to monitor or control incentive structure to maximize internal information shar- global/personal economic activities. Another closely related ing, innovation creation and productivity under certain con- area is user interface design, or more broadly, human-computer straints. An information market is deployed at the core of interaction (HCI) design, which determines the usability and the platform, joined by \social substitution", which provides user experiences of the software system. the general incentive structure. Our research provides spe- cific design details, and insights into problems pertinent to 1.2 Research Problems & Goals information markets through software deployment and data The problem is originally motivated by the actual failure of analysis. KMS inside organizations. However, the significance of in- formation markets design, or more broadly, incentive mech- Several subareas of economic theories constitute the theo- anism design, goes well beyond the scope of organizational retical foundation of this research, and guide the design of knowledge management. an information market in practice, which include: The prevalence of web2.0 systems, mobile devices and perva- sive Internet access creates unprecedented information ecol- Economics of Information while a classical problem in ogy among human beings. The abundance of information this domain is about information asymmetry, we focus and the convenience of accessing information also create a on another important aspect, which is when informa- strong demand for organizing information and quickly iden- tion is traded as a product or \commodity". When in- tifying the most
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