Game Theory of the Burning Man Lottery

February 1, 2012 11 Comments

Burning Man is difficult to describe. Having never been to this event, I gather it’s a temporary city in the desert, full of art and often lacking in clothing.  Despite the somewhat disconcerting description, Burning Man is very popular.  To deal with this demand, Burning Man came up with a fairly convoluted lottery system.

The lottery system chosen by Burning Man is, like everything else related to this community, unconventional.  Let’s talk through some options Burning Man Organization could have used to deal with the increased demand for these tickets.

Players

    Burning Man Organization (BMORG) – the organizers of the event. If this were a traditional event, their goal would be to make money. However, BMORG also values fairness and equality, as well as access to the event. They just need enough money to host the event.
    Burners – the attendees of the event. Their motivation is fairly simple: they want to attend the event.

Constraints

    Really just one: number of Burners who can attend.  From what I can gather, this is approximately 53,000.

Possible Solutions -or- How can tickets be fairly distributed?

First Come, First Serve.  The easiest way to distribute tickets: BMORG sells tickets until there are none remaining.  This is the strategy they used until this year. It was discarded because tickets were selling out too quickly. Remember when I mentioned BMORG values fairness, equality, and access to the event? A first-come-first-serve model didn’t support that.

Highest Bidder. Tickets are auctioned off to whomever wants to pay top dollar for them.  This would capture the maximum amount of profit, while allowing Burners to indicate their willingness to pay for tickets. However, the Burning Man community tends to shy away from extreme-capitalist strategies.  This distribution option wouldn’t allow everyone equal access to the event.

Pure Lottery. A completely random, completely fair option. While this doesn’t allow for any sort of price discrimination on the part of the Burners, I’m honestly not sure why this method wasn’t chosen.

Hybrid Model -or - the solution they chose. The “Lottery” BMORG ended up with is a hybrid model of the three above options. You can read about it in detail here. A quick summary:

  • Round 1: Pure lottery, $420 per ticket. 3,000 tickets sold. Limit 4 tickets per entry.
  • Round 2: Pure lottery. Tickets sold in three tiers: $$390, $320, and $240. If you entered the lottery at a higher level, you were also entered into the lottery for the lower pricing levels. This captures willingness to pay of Burners. 40,000 tickets sold. Limit 2 tickets per entry.
  • Round 3: First-come-first-serve model, $390 per ticket. 10,000 tickets to be sold. Limit 4 tickets per entry.

Several Burners, knowing they weren’t guaranteed tickets this year, entered the Round 2 lottery several times, hoping one of their entries would garner them tickets. As a result, the pool of applicants was artificially inflated, generating a surge of false demand. The results of the Round 2 lottery were revealed yesterday. Right now, there are a lot of unhappy Burners who didn’t get tickets.

My Proposal -or- Not A Perfect Solution

Situations in which demand outstrips supply are tricky. For something like Burning Man, where people feel such an intense connection with the event, distributing tickets can become a very complex matter.

That being said, here’s a solution I like.  Again, it isn’t perfect, but it touches on a lot of the constraints and player values.

Of the 53,000 tickets, randomly distribute 47,700 of them, for free, via a random lottery. Fair, equitable, and allows equal access to all demographics. (I got to 47,700 because it’s 90% of the available tickets).

Auction the remaining 5,300 tickets to the highest bidder. The implication here is that the average price someone would be willing to pay for an auctioned ticket would be enough to offset the tickets given away for free. In this case, that price would be around $4,000 per ticket.  While that seems outrageous, I gather that there are some who would be willing to pay that much, especially if their ticket allowed nine other Burners to attend Burning Man for free.

Recap

The problem both Burners and BMORG face is too much demand for a product with limited supply. The motivations of each group are similar: attend a great event. However, the path to that outcome, for each group, are just different enough that seemingly simple problems like this become very complex, very quickly.

If you were solving the Burning Man Lottery problem, what solution would you propose?

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Got the Wrong Gift from Santa? How Much Should You Sell It For?

December 30, 2011 1 Comment

Have you ever wondered if you were getting ripped off on eBay?  Have you tried to sell something on Craigslist, but weren’t sure how to price it?

Pricenomics, a new Y Combinator Startup, can help.  Pricenomics crawls the web to compile a holistic price guide for a broad range of products, from bicycles to iPads.

Here’s how it works. Santa gave you an iPad 2 3G for Christmas. But you already have one, so you turn to Craigslist. How much should you ask for?

Visit the site and search for “iPad 2 3G.” Priceonomics gives you an estimate for how much you should sell it for, along with a range of prices it’s found on the internet. It then displays listings of other people selling that product.

Check it out:

Obviously, it works the other way as well; maybe you asked for a MacBook Air, but Santa didn’t deliver.  Pricenomics has browse-able guides for a range of products. If you’re looking to buy a Macbook Air, Pricenomics provides you with a comprehensive report of price estimates and sale listings.

There’s nothing fancy going on here – the website’s just quickly providing you with a lot of data, most of which you could have found on your own.

TechCrunch asked Pricenomics CEO Michael Flaxman why Pricenomics is different from other price guides.  He said,

“First, in almost all our verticals we’re the first price guide to exist. Want to know what a five-year old bicycle is worth? Good luck finding that! Second, our guides are generated by the collective knowledge of literally millions of people.  All the data is transparently available for everyone to see.  This gives us a credibility that doesn’t exist for the big car pricing sites.  This means that all of our guides are constantly updated automatically as we continue to index the web, so there’s no risk of our prices becoming stale.”

Pricenomics launched on December 21st. They may have missed the holiday blitz, but re-gift and resell season will soon be upon us.

 

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Learn Game Theory, for Free, from Stanford Professors

December 15, 2011 1 Comment

Ever wanted to dip your toes into the ocean of Game Theory?  Want to do it for free?

Now you can! Stanford’s offering several free courses online, starting in February.  A few of my esteemed Google colleagues pointed me towards this Game Theory class. It’s being taught by the inestimable Matthew O. Jackson and Yoav Shoham.

Here’s a description of the class:

Popularized by movies such as “A Beautiful Mind”, game theory is the mathematical modeling of strategic interaction among rational (and irrational) agents. Beyond what we call ‘games’ in common language, such as chess, poker, soccer, etc., it includes the modeling of conflict among nations, political campaigns, competition among firms, and trading behavior in markets such as the NYSE. How could you begin to model eBay, Google keyword auctions, and peer to peer file-sharing networks, without accounting for the incentives of the people using them? The course will provide the basics: representing games and strategies, the extensive form (which computer scientists call game trees), Bayesian games (modeling things like auctions), repeated and stochastic games, and more. We’ll include a variety of examples including classic games and a few applications.

There won’t be a lot of heavy math, and the lecture videos will broken into small chunks, usually between eight and twelve minutes each.

I signed up!  Let me know if you did, too, and we can work on this together.

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The Future of the Internet: Regulation (Part 3 of 3)

July 9, 2011 2 Comments

Today, at the World Future Society 2011 Conference, I joined members of the Weiner, Edrich, & Brown team on a panel about Youth Trends.  I identified three trends related to the internet and social media.

Disclaimer: I am a Googler, however, nothing in this post has been influenced by confidential information or is a commentary on any insider knowledge about any of the topics I might be addressing.

First Trend: Real Names
Second Trend: Reputation

Regulation

The last two trends related to increasing accountability.  Organizations are holding end-users accountable for real names and for confirming their identities.  End-users are holding organizations accountable for their actions, and making decisions based on the reputation of those organizations.

The third trend deals with regulation – governments holding organizations accountable for their actions.  Going forward, the internet is going to be a much more regulated space.  It will be far less of a Wild West, and much more of a New York; a big, full, mature city, with regulations guiding actions of both organizations and end-users.

The European Union is at the forefront of this regulation.  On May 25th, the EU implemented a law surrounding cookies, which are essentially technology tracking devices.  The privacy law, often referred to as a “do not track” law, requires websites within the EU to obtain a visitor’s consent before installing a cookie in their browser.

The EU also has been discussing a “Right to be Forgotten” law.  The law would require websites in the EU to allow users to demand that organizations delete all of that user’s data, whether it’s personal data or unflattering photos.  The EU has been throwing this idea around for a few years; Viviane Reding, the Vice-President of the European Commission, gave a speech about this concept in 2010.  You can read a transcript of her controversial speech here.

The United States has been getting onboard with the “Right to be Forgotten” initiative.  While some of the policy specifics differ with those of the EU, “the EU and U.S. already agree on some general concepts, such as the idea that privacy safeguards need to be designed into Web products from the start.” They also both agree that all end-users should have the “do not track” option.

As any technology does, the internet is growing up.  We’re starting to figure out how it can be useful, harmful, or fun.  The next steps in that evolution are real names, reputation, and regulation.

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The Future of the Internet: Reputation (Part 2 of 3)

July 9, 2011 2 Comments

Today, at the World Future Society 2011 Conference, I joined members of the Weiner, Edrich, & Brown team on a panel about Youth Trends.  I identified three trends related to the internet and social media.

Disclaimer: I am a Googler, however, nothing in this post has been influenced by confidential information or is a commentary on any insider knowledge about any of the topics I might be addressing.

(First Trend: Real Names)

Reputation

Increasingly, internet users are considering the reputation of organizations before they put their data into those organizations’ websites.

In the early days of the internet, few organizations had been around long enough to have an established reputation of any sort.  Not only that, but the implications of giving your information, or data, to a website weren’t clear.  Some might argue the implications are still not clear.

When end-users enter their information into a website, most are not sure where that information goes.  When users enter information into websites, they don’t really know where that information goes, or what the website does with it.  This could be for a variety of reasons.

  • End-users don’t read the privacy policies.
  • Privacy policies are written in legal-ese – even if end-users do read them, they aren’t elucidating.
  • Companies do not have policies surrounding end-user data.
  • Companies do have policies surrounding end-user data, and don’t want end-users to know what those policies are.

Google+ is a new social networking site, hosted, obviously, by Google.  The importance of company reputation, in the social networking space, can be summed up by this comic:

Up next: Regulation

Edit 7/17.  Check out this Doghouse Diaries comic on Legalese:

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