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If an idea plus zero additional work is worth less 20%, but an idea plus substantial additional work is worth more than 20%, isn't there an amount of work that
by jessriedel 8y ago
If an idea plus zero additional work is worth less 20%, but an idea plus substantial additional work is worth more than 20%, isn't there an amount of work that makes the agreement worth it? I guess you have some sort of intuition that there's no reasonable way to agree to anything in between for incentive reasons or something, but that's not clear to me at all. Can you explain?
- pas 8y agoTransaction costs are not 0. So even if it seems like that would be a nice and stable equilibrium, getting there might be simply too expensive.
- jessriedel 8y agoSure, that's possible. But what's the actual argument?
- JamesBarney 8y agoThe biggest issue is you have information asymmetry between the domain expert and the developer. Because developers can't tell the difference between great ideas and bad ones they'll pay the same price on the market. If all ideas sell for the same amount and you're a domain expert than it makes sense to keep your best ideas and sell your worst ones. This drives down the average quality of an idea as well as price which means less domain experts are willing to sell at market price which drives down quality, etc... Very similarly to an insurance death spiral. A similar process also drives down the average quality of the developer working on the work.
- jessriedel 8y agoThat adverse-selection argument applies to all selling of ideas. It doesn't address my question.