Barter - Mechanism Design of A Market-incented WisdomExchange for Organizations and Communities

Dawei ShenMedia Laboratory

Massachusetts Institute ofTechnology

dawei@media.mit.edu

Marshall Van AlstyneCenter for Digital BusinessMassachusetts Institute of

Technologymarshall@mit.edu

Andrew LippmanMedia Laboratory

Massachusetts Institute ofTechnology

lip@media.mit.edu

ABSTRACTWe are exploring the design and creation of information mar-kets with a goal of bringing an electronic, distributed marketto a community or an organization to enhance knowledgesharing, innovation creation, and productivity. We applyinnovative market mechanisms to construct incentives whilestill encouraging pro-social behaviors. A key advantage ofthis study will be a direct appeal to information economictheories and market principles on information markets de-sign. A web-based software platform called Barter is devel-oped and deployed at several university sites. User data havebeen collected and analyzed to test the effectiveness of aninformation market and its various forces. In this paper, wefocus on presenting the framework design of an informationmarket, and demonstrating why such market architectureprovides a long-term sustainable incentive structure to anorganization and its members. We also present in this paperkey findings we have learned through system deployment.

Categories and Subject DescriptorsH.4 [Information Systems Applications]: Miscellaneous;H.5.2 [Information Interfaces and Presentation]: Mis-cellaneous

General TermsDesign, Economics, Management

KeywordsKnowledge markets, Information markets, Mechanism de-sign, Organizational design, Incentive design, Informationeconomics

1. INTRODUCTION1.1 BackgroundKnowledge and innovation represent significant organiza-tional resources and directly impact organizations’ successand competitiveness. A class of information systems, re-ferred to as knowledge management systems (KMS), have

been promoted both by researchers in academia and by in-dustry leaders in practice [2]. Firm managers often ap-preciate the critical role of knowledge management systemsin retaining employees’ knowledge, encouraging informationsharing and innovation creation, and enhancing work pro-ductivity, usually through the usage of ‘Enterprise Web 2.0’platforms. However, a discouraging fact is that more than70% of KMS initiatives among U.S. organizations are under-performing mainly because of the adoption problem [12]. Animportant reason for the failure is that the incentive struc-ture has not been designed and constructed properly. Mem-bers of an organization, e.g. firm employees, lack the incen-tive to participate and share information, especially in thepresence of their existing work commitment and reportinghierarchy. In several other cases, the competitive culture ofthe organization actually dis-incentivizes its members fromsharing knowledge, either because a question or a requestmight be interpreted as a signal of weakness, or becausepeople believe sharing critical knowledge or information im-plies giving up their competitive advantages. These practi-cal challenges faced by many firms, especially the ones withcompetitive environments and relatively scarce resources, inpart motivated the research work presented in this paper.

The concepts of KMS and internal social media are closelylinked to recent research development on crowding sourc-ing and collective intelligence. “Incentive” is considered asone of the “genes” that constitute collective intelligence[11].However, organizations’ management usually carries out in-centive design in a central-planning manner, neglecting thepower of the crowd itself in determining appropriate re-wards. As a result, though many organizations invest signif-icantly in incentive design when deploying an internal KMS,the measures taken often fail to achieve long-term effective-ness, fairness, and stability.

In our research, instead of building a knowledge manage-ment platform, we aim at establishing a “knowledge econ-omy” inside an organization. We apply market principles tothe underlying mechanism in order to address the challengeof incentive design, and use the price tool to balance thesupply and demand of knowledge, innovation and even useractivities. 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 thefirm can improve forecasting, innovation, and pro-ductivity.” ... “Markets cause resources to speakup and self-identify. Markets provide the frame-work to arbitrage the gap between problem andopportunity. To get these benefits, executivesmust bring market forces to bear within the firm.The rules, the rewards, and the running of inter-nal markets differ from those of a hierarchy.”

The importance of incentive mechanism design goes beyondthe scope of an organization or knowledge management.Nowadays, web and mobile platforms are pervasively usedto collect resources and wisdom from the crowd to completetasks and spread information collaboratively. Incentivizingusers to participate and contribute in such networked sys-tems has become a critical issue. For instance, the winningstrategy in the DARPA Red Balloon Contest incentivizedusers to forward information by rewarding users along a so-cial path connected to the user who found the balloon [14].The complexity of the incentive structure depends on thetime horizon of the system’s intended use.

The significance of incentive mechanism design also ariseswhen we develop the framework of “Open Transaction Net-works (OTN)”[10] [9]. In OTN, users share their personaltransaction histories and associated opinions in order to ex-plore the full social value of transaction information. A cru-cial assumption and challenge here is that users have theincentive to share private information within their social net-works, and receive benefits and rewards appropriately.

In this research, we focus on an organizational setting, wheremanagement of the organization tries to design the optimalincentive structure to maximize internal information shar-ing, innovation creation and productivity under certain con-straints. An information market is deployed at the core ofthe platform, joined by “social substitution”, which providesthe general incentive structure. Our research provides spe-cific design details, and insights into problems pertinent toinformation markets through software deployment and dataanalysis.

Several subareas of economic theories constitute the theo-retical foundation of this research, and guide the design ofan information market in practice, which include:

Economics of Information while a classical problem inthis domain is about information asymmetry, we focuson another important aspect, which is when informa-tion is traded as a product or “commodity”. When in-formation is generally considered non-excludable withzero repetition costs, how shall we design a marketplatform that takes these characteristics into consider-ation and prevents market failure[4]?

Two-Sided Market Theory describes how to promote adop-tion of a technology standard and stimulate third-partydevelopment by subsidizing user/developer network ef-fects. For knowledge management, this tells us how toget users to adopt a new system and how to subsidizecontent creation and content consumption so employ-ees themselves add continuous value.

Price Theory describes how markets efficiently allocate re-sources across an entire economy using only privateinformation. It also tells how markets supply miss-ing goods. For knowledge management, this is criticalin getting people to produce valuable knowledge forothers but only when this is more valuable than whatthey are already doing. It can also tell us how to valueintangibles. [8].

Quantity Theory of Money or more broadly macroeco-nomic theories on monetary policies, describes how tomanage a supply of value – money, credit, and points– to achieve economic vitality and growth by choosingexpansionary or contractionary policies. For knowl-edge management, this shows how to stimulate andregulate trade volume in the firm’s internal knowledgeeconomy[7][6].

Financial markets theory provides the rules and guide-lines when information products are securitized andexchanged on a secondary market [13]. The theory alsocovers computerized market-making algorithms [5].

In addition to the economic theories listed above, severalother research fields also play crucial roles in the designprocess of an information market and determine its overallsuccess. For example, Natural Language Processing (NLP)is applied when we need to compare, sort or index tex-tual information contents users create. Social network mod-eling and analysis techniques are instrumental in under-standing the dynamics of social interactions and how infor-mation propagates through the network. Information pre-sentation and visualization is particularly important whenwe design dashboards and gadgets to monitor or controlglobal/personal economic activities. Another closely relatedarea is user interface design, or more broadly, human-computerinteraction (HCI) design, which determines the usability anduser experiences of the software system.

1.2 Research Problems & GoalsThe problem is originally motivated by the actual failure ofKMS inside organizations. However, the significance of in-formation markets design, or more broadly, incentive mech-anism design, goes well beyond the scope of organizationalknowledge management.

The prevalence of web2.0 systems, mobile devices and perva-sive Internet access creates unprecedented information ecol-ogy among human beings. The abundance of informationand the convenience of accessing information also create astrong demand for organizing information and quickly iden-tifying the most critical bits of knowledge. This is oftenaccomplished in a decentralized process, dubbed as “crowd-sourcing”or the“wisdom of crowds”. Users collectively sharetheir knowledge, evaluate and validate knowledge or infor-mation they receive from peers. A flurry of platforms havebeen invented and established on the web or on the mobilenetwork to realize this crowd-sourcing model. Goals andfunctions of these platforms are widely diverse, including so-cial bookmarking (reddit.com), review/rating exchange (yelp.com,Amazon.com), Q&A (quora.com, vark.com), to name a fewexamples. Moreover, there are new models and systems be-ing continuously developed and released to customers.

The premise of these systems is that users have the incen-tive to spend some time of their already hyperactive-packeddaily lives, and share their knowledge with others or performcertain activities. Whether a solid and sustainable incentivestructure is designed and systemically placed crucially de-termines the success of these systems that rely heavily onuser participation and contribution.

There are many starting points to design incentives. Peo-ple contribute their personal resources (time, knowledge,skills) for a variety of reasons: altruism, gaining reputa-tion, expertise promotion, fun, self-learning, etc., which canbe broadly categorized into“social incentives”and“economicincentives”. The primary goal of this research is to design aninformation market in a pro-social manner, providing a rig-orous incentive mechanism based on market principles whilepreserving the significance of pro-social behaviors in the sys-tem. Many existing systems, including KMS platforms orinternal social media platforms that organizations deploy,rely more heavily on social incentives, and barely explorethe creation of a proper market incentive. In some othercases, the platform recognizes the importance of providingeconomic rewards for users’ contribution; however, users arenot rewarded fairly based on the true value of their contri-bution. In addition, such reward plans are not sustainable,lacking long-term effects needed to maintain users’ interestsand participation.

These challenges inspire us to reconsider and compare howwe human beings organize our production and wealth distri-bution in the real world: we have created a product-serviceeconomy with market forces that guide the allocation of re-sources and direct human power. Pivotal factors of sucha decentralized economy include currency, centralized con-trol and regulation, and other non-market determinants suchas social forces. Though stumbling occasionally, a well-established economy sustains its growth, fairness, and ef-ficiency. The next question is: can we extend and apply thepower of a market-based economy to the domain of infor-mation and innovation management? If so, how to designsuch a market where information and innovation productsexhibit peculiar characteristics?

At a high level, the goals of this research include:

• Identify circumstances and conditions where a market-based mechanism is applicable and effective;

• Understand the relationship and trade-off between so-cial incentives and market incentives, and how to de-sign a market in a pro-social way;

• Identify building blocks and crucial elements when con-structing information markets, and dependencies andlinkages among them;

• Study and measure the strength and effects of variousmarket forces;

• Explore the impacts of user interface design in theadoption and efficacy of the platform.

The scope of this research is very broad, and there are awide spectrum of related research questions and issues from

diverse fields we can address. This paper aims at definingand establishing the framework of designing an organiza-tional information market, and stimulating discussions onthis new research area.

The remainder of this paper is organized as follows. Thefocus of this paper is on the framework design of an infor-mation market, which is covered in detail in the next section.Section 3 introduces the software deployment and discusseson lessons learned from collecting and analyzing user data.We conclude and point to future directions in the last sec-tion.

2. SYSTEM ARCHITECTUREIn this section, we focus on the framework design of an infor-mation market, and introduce its software implementation.We present in detail the market framework we have designed,and illustrate key concepts and design choices by using di-agrams and screenshots from the software. The best wayto fully understand the system as well as the research is tojoin Barter (http://iknow.mit.edu/) as a user and navigateits features.

2.1 Overview of BarterWhat is Barter? Broadly speaking, Barter creates an infor-mation economy inside an organization.

• Barter is a market-incented wisdom exchange, or sim-ply speaking, an information market, designed for or-ganizations and communities to maximize the creationand usage of knowledge and innovation from their mem-bers;

• Barter applies a multiplicity of sub-type markets toaddress different organizational challenges;

• Barter provides a mechanism to monitor and governthe economy, and apply macroeconomic policies to in-fluence its running;

• Barter is capable of measuring the value of informa-tion, and provides a long-term sustainable incentivestructure to reward information contributors fairly andencourage user participation;

• Barter provides solutions to several problems that com-monly happen to new IT platforms using innovativemarket-based approaches. Examples of these problemsinclude early elicitation of participation, system abuseand fraud, system growth and self-improvement.

While the interface and the experience of using Barter isclean and straightforward, the internal mechanism of Barteris sophisticated. We find it helpful to compare side-by-sideBarter with the U.S. economy and understand how differentcomponents of the platform operate, as shown in Table 1.

Table 1 displays the list of crucial elements of the U.S. econ-omy, and their counterparts on Barter. It is worth empha-sizing that by applying a more advanced infrastructure andsystem design, we are able to enable certain functions andfeatures that are not feasible in our real-world economy, asexplained in detail in subsequent subsections.

Table 1: Comparison between U.S. economy and the Barter information economyU.S. Economy Barter Information EconomyCurrency (U.S.dollar)

Barter implements its own virtual currency system. A unit ofcurrency is named a “Yuanbao”. It is a single-typed currencyuniversally accepted and circulated inside Barter. Users can ex-change “Yuanbao” for either knowledge or physical rewards. Ad-vanced features of Barter’s currency system include serializationand expiration.

Markets forproducts &services

Barter implements multiple types of markets to meet various orga-nizational needs, such as 1) Q&A market, 2) document exchange,3) idea market, 4) prediction market, 5) service market, 6) newsmarket, 7) reward auction market, 8) self-design market, 9) fraudmarket, etc. These markets are referred to as “primary informa-tion markets”.

Federal ReserveBank & mone-tary policies

Barter establishes an entity, dubbed as the “world bank” to trackthe issuance and retrieve of currency into and out of the economy.A set of dashboards is designed for the “chief economist” of Barterto monitor and understand the status of the economy. Anotherset of economic tools is implemented and can be used by theadministrator to adjust certain parameters of the economy andimpact its operation and running.

Organizationsversus Individu-als

Users on Barter can form groups, and perform intra-group orinter-group market activities. A more advanced grouping struc-ture is called a “guild”, of which users have to “earn membership”by accumulating enough expertise points on a certain field.

Regulatory bod-ies

Barter employs self-governing and regulation by resorting to thecrowd and creating similar market incentives.

Securitizationand secondarymarkets (Equity,Commodity,Bond markets,and Derivativemarkets)

On Barter, information products can also be securitized and theinformation securities can be traded on a secondary market. Se-curitization can be applied to multiple markets, such as the Q&Amarket, the document exchange and the idea market. Such deriva-tion increases market thickness, helps sort and organize informa-tion by its value, and improves the timeliness and quality of in-formation by establishing ownership.

Figure 1: A list of general market design principlesthat Barter has followed.

Figure 2: System architecture of the Barter marketplatform.

2.2 Design Principles of BarterBarter is a market of a special type - an information mar-ket, where information products are exchanged among users.However, Barter first needs to adhere to the general prin-ciples of markets design, as summarized in the diagram inFig.1. The four principles listed in Fig.1 need to be satisfiedin order to have almost any type of market running stablyand efficiently.

Next, when the exchanged goods in a market are informationproducts, the following characteristics of information need tobe carefully taken into consideration when designing Barter,as illustrated in Table 2. Otherwise, the market is prone tofailure.

2.3 System ArchitectureBefore introducing how each individual market on Barterworks, we first present the system architecture of the entire

Barter platform, as depicted in Fig.2.

The infrastructure that underlies and supports Barter in-volves two critical modules: a social network backend and atransaction backend.

In the middle layer lies the core of the system - a suiteof various types of information markets designed to sat-isfy different organizational needs. Users on Barter performmost of their market activities through these different typesof markets. Three important modules, 1) Economy Mon-itor/Control module, 2) Knowledge indexing/storage mod-ule, and 3) Expertise matching module, are designed andbuilt as peripheral modules around the suite of markets, andare instrumental in managing information and maintainingthe health of the economy.

On top of the system hierarchy is an interesting but pow-erful layer called secondary markets of information, also in-troduced in Table 1. It is built on top of two mechanisms- 1) information securitization and 2) fair distribution. Sec-ondary information markets address some very significantchallenges such as the lack of incentives to spend or insuffi-cient market liquidity.

In the following subsections, we first introduce the functionsand mechanisms of different types of markets, and then dis-cuss about each individual module in the system diagram.

2.4 Multiple Types of Information MarketsThese different types of information markets are the primaryinterfaces to end-users. An organization deploys these mar-kets (or a subset of them) to address different challenges.A list of various types of markets with their names andshort descriptions are illustrated in Fig.3. These marketsare referred to as primary information markets, as opposedto“secondary markets”when we discuss about securitizationand fair distribution later.

Currently, in the software implementation of Barter, all mar-kets except the service market and the prediction markethave been implemented and operational, to various degrees.Prediction markets have already been extensively studied inthe research community and in industry practice. Instead,we propose a prediction market built on top of an idea mar-ket, and plan to test its effectiveness through experiment.

Fig.4 displays a screen shot of the Barter platform. The tabbar on the top-right shows a list of information markets theuser can access and participate in. Two dashboards selectedfrom the “Global Economy” monitoring panel are shown inFig.5, which illustrate the transaction volume categorizedby market types, and transaction types.

Elaborate descriptions of how each type of market oper-ates require considerable page space. Therefore, we onlyselect the most significant features and explain the designchoices. Fig.3 highlights three independent and special mar-kets, whose roles and mechanisms are distinctly differentfrom other markets’.

2.4.1 Design Market

Table 2: Challenges of Information Products and Barter’s SolutionsCharacteristics ofInformation Prod-ucts

Barter’s Design and Solutions

Information and in-novation has spillovereffects, and is non-excludable

1. The spillover effects should not be treated negatively in thecontext of organizational knowledge sharing and innovation cre-ation. A more important issue is to reward information creatorsfairly; 2. We have devised algorithms to track information reuse,trace back contributors, and reward them fairly. 3. We encour-age pro-social behaviors to reward information providers, suchas tipping.

Information is costlyto create and costlessto replicate

1. The fair distribution mechanism guarantees that original in-formation creators get continuously rewarded for providing valu-able information; 2. A market-based approach for the detectionof fraud and copyright infringement; 3. Several mechanisms arein place to protect information providers. For example, answer-ers in the Q&A market can choose to hide their answers untilthe question expires.

Evaluation of in-formation requiresaccessing non-excludable informa-tion first

1. Rewards are offered by information seekers upfront, and arefrozen by the World Bank to enforce payment and allocation. 2.Information seekers get penalized for ignoring to judge informa-tion quality and distribute rewards, and charged for extendingthe expiration time.

Figure 3: Various types of information markets onBarter: names and functions

Figure 4: A screen shot of Barter - A user is viewingall ideas submitted in the iDea market; the tab barat the top displays the list of information marketsshe can access.

Figure 5: Two“global economy”dashboards display-ing pie charts of total transaction volume by a) mar-ket types, and b) transaction types.

The purpose of the design market is to empower Barter tokeep improving itself by having new features, bug fixes, anddetecting market defects through the market mechanism it-self. We also call it “design for self-design market”.

Instead of having the IT department take the full respon-sibility of maintaining the system, discovering market loop-holes, and prioritizing new features or bug fixes to imple-ment, an organization can utilize the market platform itselfto achieve these goals much more wisely efficiently.

The crowd of users collectively helps design the market andprioritizes tasks. When a user discovers a bug, a marketloophole, or needs an extra feature, she can submit it tothe iDesign market and offer a certain number of points asrewards to developers if her idea gets implemented. Otherusers can vote on the idea to change its priority. If theydeeply like the idea and want the idea to be realized sooner,they can supplement more points to the pool of rewards. Fig.6 displays the interface for an idea and related controls.

2.4.2 Product Auction MarketiBid is an auction market where users can exchange theirvirtual currency for physical products or services they enjoy

Figure 6: A submitted design in the “iDesign” mar-ket

Figure 7: A screen shot of the product auction mar-ket.

in real lives. Any user can post an item for sale and otherusers bid on the item using their “Yuanbao”, as they doon eBay with real money. iBid provides a mechanism forusers to acquire points when they run out of points, or cashout points for physical rewards. We need to emphasize twoimportant roles the product auction market plays which arecritical to the entire information market framework:

1. It provides the organization’s management with an im-portant tool to offer long-term sustainable monetaryincentives to the platform. The auction market iso-lates the monetary incentives from unnecessary detailsof information creation;

2. It provides an important mechanism to take virtualcurrency out of circulation when the “chief economist”exerting contractionary monetary policies.

We will revisit this issue when we discuss about incentivesand organizations’ strategies later.

Fig.7 displays a screenshot of the product auction market.As seen from the list of products on sale, users are creativein choosing what products/services to sell.

2.4.3 Market Fraud and Fraud Market

A companion of any type of market is market fraud, whichjeopardizes the market safety as highlighted above. Possibletypes of market fraud include

Money laundering For example, a user transfers points toanother user by asking a simple question and allocatingall points to the other user who just provides a naiveanswer. The goal is to 1) boost the user’s expertisestatus for related tags, or 2) turn unearned points intoearned points.

Market abuse Users leave garbage comments or informa-tion to earn system subsidy.

Copyright infringement There are two possible cases -1) upload copyrighted materials in the document ex-change, or 2) directly plagiarize other users’ contentand paste without acknowledgement.

All these types of market fraud were evident in our researchdeployment, where we did not deploy a governing and reg-ulatory mechanism. To clean and prevent future marketfraud, we have designed a market-based mechanism, i.e., thefraud market. Detection of market fraud is sourced to thecrowd. For example, when a user detects a potential fraudor inappropriate content, she can red flag it. When flaggedenough times, a case will be moved to the fraud market,where users can vote on whether the case actually involves afraud. When the case is closed and a verdict is made, userswho vote on the right side will be rewarded. The offendergets penalized so that she experiences both economic lossesand social damages on reputation.

2.4.4 Other information marketsIn this section, we briefly explain the roles and functions ofthe other major types of information markets.

Q&A Market (iKnow) is an information market that al-lows users to ask questions to the Barter communityand reap a profit if their questions become popular.Each time a user asks a question, she needs to createan associated reward and an expiration date by whichall answers must be received. When the question ex-pires, the asker can review received answers and divideup reward funds based on the quality of the responses.The asker can also rate each answer so that users knowthe quality of provided answers. Other users can voteon answers, and if they find an answer really help-ful, they can tip the answerer with extra funds. Fig.8shows the page of a Q&A interaction.

Document exchange(iDoc) is an exchange that allowsusers to share documents with the Barter community.Other members of Barter can rate the documents, andpay a one-time fee in order to download or view whatothers have posted. When a user tries to post andshare an important and original document, she canset the price of the download that each user must paywhen accessing the document. If a document containsan idea which gives rise to other related contents onBarter, the original contributor receives a kickback forposting the original document.

Figure 8: The page of a Q&A interaction in theiKnow market.

News Market (iNews) is an information market that al-lows users to post articles, news, or announcements tothe Barter community and reap a profit if their post-ings become popular. Members of the Barter commu-nity can vote on all submissions, and the popularityof a posting snowballs over time as top trending postswork their way to the iNews front page. When a userposts an article, news item, or personal anecdote, sheneeds to allocate for the posting an initial value (Bud-get) and a set number of points that are given to userswho read her story (Points Per View, or PPV). It ishelpful to think of PPV as an advertising cost paidfor each user: when people read her story for the firsttime, the amount of points set as PPV is deductedfrom the user’s Budget. When the Budget runs out,the post expires.

Views are not the only factor that affect a posting’sBudget – votes from viewers play a crucial role as well.Whenever a posting receives an up-vote, PPV pointsare credited back to its Budget, which means that userswho read and up-vote a posting help its Budget – andsince users can vote multiple times, a posting’s Budgetwill increase if it would attract many users. By con-trast, a user may down-vote a posting, which harmsthe Budget by subtracting PPV points for each down-vote. Since voting affects the Budget significantly, weput safety measures in place to mitigate the marketrisk - for each additional vote, the cost of voting in-creases exponentially to the same user.

Idea Market (iDea) is a marketplace for innovation, andfor matching solutions to problems. A user can either

submit a standalone idea or submit one in response toanother user’s request. A member of an organizationmight have innovative ideas on the organization’s op-erations, products or activities. She can submit herideas on the idea market, get them examined, vali-dated and improved by other members, and receiverewards when an idea gets promoted by senior man-agement or even adopted. Another use case is like an“online brainstorming” session. A user might need in-spirations on a particular problem, such as“how shouldthe next-generation ATM machines look like?”. Shecan “request” ideas from the community on this issueby offering rewards, and distribute them to users whosubmit the best ideas. Users who are not the origi-nal submitter of an idea can participate by rating andvoting on the idea.

The iDea market is used by two MIT courses “De-velopment Ventures” and “Media Ventures” as classtools for students to exchange venture ideas and cross-evaluation.

All Q&A interactions, documents, news items, and ideas aretagged by both original information providers and the entirecommunity as well, for knowledge indexing, searching andstorage.

2.5 Backend & Peripheral Modules2.5.1 Social Network Backend

Social features are instrumental in getting users attractedand engaged. On Barter, a user manages her profile andcontrols what information is accessible to other users. Userscan establish friendship and form communities among them-selves if they share similar interests or job functions.

The formed social graph constantly updates itself with newmarket activities. For instance, a user can make her questionor document private by sharing it only with her friends net-work or within a particular group. Conversely, the systemhas the capability to tell a user who she interacts with mostin the market so that a friendship link can be potentiallyestablished, users who share similar interests and interactmore can form a group.

Fig.9 displays an interactive tool on Barter for social naviga-tion with a user-centric view. Attributes of the visualizationare interpreted as follows: (a) Radius: frequency of interac-tions in the market; (b) Thickness of links: amount of pointsexchanged; (c) Color of links: inflow vs. outflow of points;(d) Popup list: past interactions in the market; (e) Buttonsshown when a user’s icon is clicked: ask the user a questionor go to the target user’s self-centric view.

When Barter is deployed as an internal market tool for anorganization, organization hierarchy is implied in the socialnetwork in addition to user-formed connections. No useron such a socially bounded platform can act as an absolutestranger. Thus, we can expect that users exhibit sociallyresponsible behaviors, which in turn reduces the risk of usersgaming the system and sabotaging the market fairness.

2.5.2 Transaction Backend

Figure 9: Social Navigation View.

Barter’s transaction backend has two prominent features: 1)currency serialization, and 2) global bank accounts.

Each unit of currency has its own unique serial number, andhas its assigned owner. Its creation and issuance is handledby a special entity in Barter called the “World Bank”. The“World Bank” is treated as a special user, who also main-tains a bank account. Transactions can occur either betweentwo users, or between a user and the “World Bank”. Anycurrency transferred from a user to the “World Bank” ef-fectively jumps out of circulation, and reduces the globalmoney supply. New currency is created when the “WorldBank” needs to transfer currency to other users but withoutenough balance in the bank account.

The serialization of currency allows us to conveniently trackthe flow of currency in the economy such as currency’s turnoverrate and total supply. It also allows us to realize advancedcurrency controls such as the expiration of currency. Expi-ration of currency, when managed properly, is a mechanismto encourage user spending in the economy. It is also arevenue stream for the “World Bank” so that it has the bud-get to fund system subsidies. When transactions occur, theowner of corresponding currency units gets changed, and theexpiration date gets reset according to predetermined rules.

Each individual market also has a global bank account tofacilitate and safeguard transactions. For instance, in theQ&A (iKnow) market, we require the asker to allocate “all”offered points to answerers unless no answers are submitted.We achieve this by “freezing” the offered points from theasker’s bank account, and transferring them to the “iknowaccount”. These points will be unfrozen and transferred fromthe “iknow account” to answerers’ accounts when the ques-tion expires and the asker selects the best answers.

2.5.3 Expertise matching

Figure 10: Expertise Tag Cloud and ExpertiseMatching.

A user claims “expertise tags” in her profile. However, theprovided information is only partially considered when thesystem calculates the true expertise tags of a user.

The system keeps accumulating and mining historic dataabout a user’s activities in the market, including questionsshe asks or answers, documents she shares and downloads,ideas she contributes or solicits, etc. A new list of expertisetags are then synthesized and displayed on the user’s profile.

When a user posts a new question or requests a new ideaon the market, the system identifies top experts by match-ing their expertise tags with the textual description of theposting. The user has the option to pay extra points to letthe system acquire the attention of these experts.

Fig.10 shows an interactive tool on Barter named “ExpertiseCloud”. On the left panel is a tag cloud that consists of themost popular tags in the system. Tags are positioned follow-ing a modified force-directed algorithm. Links between tagsrepresent concurrence. Linked tags get highlighted when atag is clicked. The top-right panel displays a list of expertsfor the clicked tag, sorted by scores, and the bottom-rightpanel displays a list of past items in the market tagged bythe clicked tag. This is a visualization tool on Barter for ex-ploring popular topics inside the organization and matchingtop experts to tags.

2.6 Discussion on IncentivesAccording to David Ritter, CTO of Innocentive[1], internalknowledge markets are most effective when three forms ofincentives are combined: spendable currency, recognition forexpertise, and the opportunity to have a positive impact[3].Barter has achieved all three forms of incentives nicely, andprovides a long-term sustainable incentive structure for theorganization and its members. In this section, we focus onthe capacity of Barter in offering material incentives.

Users on Barter can spend their virtual currency either oninformation they need, or on physical rewards through the

auction market. Let’s use two examples as comparison toshow why the framework of Barter is more robust and sus-tainable. HP once established an incentive program basedon frequent flier miles to stimulate its employees to seek andcontribute knowledge. For example, posting a useful docu-ment to the platform earned 2,000 miles, posting a questionearned 1,000 miles, and posting an answer earned 500 miles.However, only 20% of the target audience performed oneof these activities 90 days after the launch of the program.Siemens had a similar program that relied on “shares” par-ticipants could redeem for prizes. Participating employeesearned 20 shares for contributing solutions and success sto-ries, while they earned only 10 shares for other easier tasks.This program greatly boosted participation and contribu-tion; however, information quality was poor[3].

These examples clearly show that organizations are aware ofthe significance of providing material incentives to promotetheir knowledge platforms, and are willing to invest in cre-ating monetary incentives. However, the approaches theytook exhibited some fundamental flaws:

1. Both programs were one-time shots that lacked long-term planning. After the expiration of the incentiveprogram, users stopped contributing. Existing knowl-edge collected during this period became outdated with-out further maintenance or update.

2. Price theory suggests that efficiency is maximized whenprices float. Both programs used fixed-price rewards.As a result, only information that’s less valuable thanthe given price was created.

3. In both cases, organizations attempted to directly as-sociate monetary rewards with created raw informa-tion. This is equivalent to labeling information withdollar prices, while in practice it’s extremely difficultto predetermine the value of information and map itin dollar terms.

In contrast, Barter adopts a floating-price mechanism. In-formation seekers raise offered rewards for critical issues thatrequire more efforts to provide. Information owners choosewhether to supply it given the current price, or directly ne-gotiate with information seekers. The auction market pro-vides the management of an organization a layer to isolatedelivering material incentives from classifying and evaluat-ing knowledge created inside the platform. Exchanges of alltypes of information products are denominated in virtualcurrency, the value of which is determined separately by thecrowd of users through their activities in the auction market.

Instead of offering a one-time lump-sum reward, an orga-nization can distribute material rewards through the auc-tion market in a continuous and strategic way. Dependingon several key economic indicators, such as user activities,price indexes and currency supplies, the “chief economist”of Barter can determine the density and value of the prod-ucts posted in the auction market. While used to providematerial incentives, the auction market is also an importantmechanism to stimulate or stabilize the entire knowledgeeconomy.

3. SYSTEM DEPLOYMENT & DATA ANAL-YSIS

Barter is a web-based software platform that realizes theinformation market designed in our research. A functionalsite is currently hosted at http://iknow.mit.edu/. Barterhas been deployed, or is being deployed, in a few differ-ent environments, primarily in classroom settings at a fewuniversities. New features are continuously developed andadded to the Barter platform.Through the wide deploymentof Barter, we are able to collect a rich dataset on marketoperations and user behaviors.

There are around 350 users from five universities with di-verse backgrounds and expertise areas who are using Barter.They started with certain number of “Yuan Bao” allocatedto their bank accounts. We do not ask users to engage inany particular activity attentively. Simply, Barter serves asa day-to-day tool for students to exchange knowledge, sharedocuments, contribute ideas, post news, etc., following theunderlying market rules.

Incentive design, especially the translation of virtual pointsto meaningful rewards, is important to the deployment andexperiment. The goal is to get users motivated and incen-tivized to participate. The auction market, “iBid”, providesa mechanism for users to exchange earned points for re-wards they care about. Meanwhile, we can use the auctionmarket to measure the value of information in dollar termsfor our research purpose. We designed and decided uponan incentive structure, advertised it to users at the begin-ning of the deployment period. For example, we keep post-ing iTunes gift cards, small consumer products, and lunchopportunities with faculty members on the “iBid” market.For a few classes, participation grades were associated withearned points. All user activities, transactions and marketstatistics have been captured by the system and stored inthe database. There are over 90 database tables support-ing Barter at the backend. For addressing different researchquestions, we will utilize and analyze different subsets of thedatasets.

In this paper, since the primary focus is on the frameworkdesign and system architecture, we only present some pre-liminary results from the user study and data analysis.

Fig.11 shows several dashboards for monitoring the globaleconomy for the past year (04/2010-04/2011). The “chiefeconomist” of Barter can use it to monitor several key eco-nomic indicators of the economy. For instance, Fig.11 con-tains three dashboards that show the number of questionsand answers each day, the“price index”of the iKnow market,and the transaction volume as time series. It is evident fromthese curves that users do respond to material incentives.In mid-June 2010, we posted an iPad on the auction mar-ket, which greatly stimulated market activities (and marketfraud too!). In March 2011, we released the inews marketto users and posted several valuable rewards on the auctionmarket, which also stimulated the economy.

A question frequently asked in the context of an informationmarket is if market forces are effective. The Q&A market(iKnow) was first implemented and used in the deployment.Thus, we analyze data collected from iKnow to see if offered

Figure 11: Economy monitoring dashboards

points affect the quantity and quality of answers provided.

Fig.12 shows the number of questions asked for each level ofoffered points, anonymous, non-anonymous, and total num-bers are all displayed. The dataset is collected from the maindemo site (iknow.mit.edu). Most questions were asked witharound 20 points offered, while only a limited number ofquestion rewarded >100 points. Fig. 13 shows the averagenumber of answers a question can receive for different levelsof offered points. As we see, when the number of offeredpoints is less than 100, there is a general trend of increasednumber of submitted answers as the offered points arise. Asthe offered points exceed 100, we can expect that the diffi-culty of the question would increase significantly, thus thenumber of submitted answers decreases sharply. Interest-

Figure 12: Number of questions asked categorizedby the number of points offered - a) all questions; b)anonymous question; c) non-anonymous questions.

Figure 13: Average number of answers obtained,categorized by the number of points offered for ques-tions - a) all questions; b) anonymous question; c)non-anonymous questions.

Figure 14: Average length of answers obtained, cat-egorized by the number of points offered for ques-tions - a) all questions; b) anonymous question; c)non-anonymous questions.

ingly, there is strong linearity for anonymous questions. InFig.14, we use the average length of answers as a proxy forthe quality of answers. It is evident from the graph thatthe average length of answers keeps increasing as the offeredpoints arises for a question, and when the offered pointsexceed 100, the increased difficulty thwarts good quality an-swers.

Both curves exhibit a reverse-U shape, and the local max-imum in terms of both quantity and quality of answers isachieved when the number of offered points are in the 90-110range. Interestingly, this is also where the curve in Fig.12reaches a local peak value.

4. CONCLUSIONIn this paper we present the design of an information mar-ket framework which is able to provide a long-term sustain-able incentive structure to organization members to collab-oratively share knowledge and create innovation. We havealso introduced the software deployment and lessons learnedfrom user activities. By applying innovative market mecha-

nism design, we are able to address organizational challengesusing a market mechanism efficiently. Our preliminary dataanalysis demonstrates that market forces are effective in in-centivizing users to contribute information and engage in anew platform.

The next stage of the research is to utilize the existingBarter platform to design experiments, test several researchhypothesis by conducting rigorous data analysis and gainfurther insights into information markets design. Examplesinclude:

• What is the correlation between the quality and quan-tity of supplied information and the attributes of aninformation request?

• Which is more effective in getting users to contribute,social incentives or economic (market) incentives?

• Can an information market regulate and correct it-self by using the same crow-sourcing mechanism andmarket incentives, given the evidence of market abuse,points laundering, IP infringement and fraud?

• Can securitization and a secondary market encourageuser participation, increase market liquidity, and en-hance the quality and validity of provided information?

We believe this is an interesting and promising research areathat’s worth more exploration. The learnings from the re-search will offer great insights into organizational design.

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