Joseph Thiebes (thiebes) wrote in clerk_house,
Joseph Thiebes
thiebes
clerk_house

The Fraternal Dilemma, Part 3

More on Equilibrium

In The Fraternal Dilemma, Part 1 I introduced the concept of a Nash Equilibrium. In a public goods problem, when contributions are voluntary but benefits are shared by all, an equilibrium occurs when the bills are paid. When this occurs, whatever strategies people chose to effect the outcome (i.e., paying dues or not paying dues) will be reinforced.

If someone does not pay dues but the bills still get paid, the next time the plate is passed around they will have less motivation to contribute than they did the first time, and will not change their strategy.

Another person, who did pay dues, and saw that the bills were barely covered, remains motivated to give because they perceive their contribution as necessary.

When we reach an equilibrium, it becomes very difficult to raise more money. Obviously if most people just want to see the rent get paid, there is very little reason to keep giving, or to give more, if the local body is always "in the black." If the local body starts to take in more than it sepnds, it has to be careful not to make too much, or people will contribute less. If a bunch of people think this way, a surplus one year could translate into severe deficit the next.

Something that many will not consider, however, is that a local body's income should really be at least 25% more than their expenses. Without the additional income, there will be no flexibility to make improvements, buy new equipment, repair and maintain existing equipment, or move into a new space at some point. As long as contributions are voluntary, however, any such savings could also be wiped out if people decide that the local body can do without them for a while.

To bring this into focus: if your local body had a bank balance of $10,000, how many would continue to pay dues?

Here are a few strategies that I have used to overcome some of the problems that equilibria cause:

1. Find ways to increase benefits as income rises.
- a. Drastically lower member prices on fundraisers
- b. More members-only events
- c. Start making improvements to things that require money

2. Make longer-term goals for specific projects which require savings. (Make sure they are goals that members will support)

3. Deemphasize balances in reporting. Emphasize regular net income goals.

4. Nurture a culture of shared responsibility and "ownership" so that when there is a surplus, the membership feel this as an intrinsic benefit and do not feel like they would benefit more by stopping contributions.

Can you think of any other strategies to prevent a Nash Equilibrium from putting a cap on income?
Tags: diagnosis, game theory, inquiry, solutions
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