The Economics of the Asteroid Deflection Problem (Dominant Assurance Contracts)

Update 2023-09-04: Partial Update: I’m fully funded!

Update 2023-09-21: Full Update. Funding is over.

Update 2023-11-28: Final Update. Platform Launched!

Imagine a world with no ads or paywalls. A world where open-source software gets the same level of funding as proprietary software. A world where people can freely reuse ideas and music without paying royalties. A world where people get paid for writing book reviews. A world where Game-of-Thrones-quality shows are freely available on YouTube. A world where AI safety research gets the same-level of funding as AI capabilities research. Is this a fantasy world? No, this is the world where people use Dominant Assurance Contracts

If you are already convinced you can make this idea a reality by donating to create a Platform for Dominant Assurance Contracts. If you are not convinced read on.

The Free-rider problem

A few months ago I stumbled across this video. (I highly recommend you watch the video, but if you don’t have time, I’ve summarized the video below).

Summary of A Deeper Look at Public Goods

A good is rival if one person’s use of a good diminishes another person’s ability to benefit from it. Jeans are rival. If I’m wearing a pair of jeans, you can’t wear it at the same time. Asteroid deflection is non-rival. If I deflect an asteroid to protect myself, you are saved with no additional cost.

A good is excludable if people who don’t pay can be easily prevented from using a good. An example of a good that is excludable is a pair of jeans. You can exclude people by locking the jeans in your closet. An example of a good that is non-excludable is asteroid deflection. You cannot prevent the people who did not pay for the asteroid deflection program from benefiting from the asteroid being deflected.

A good which is both rival and excludable is called a private good. A good which is non-rival and non-excludable is called a public good.

(Additionally, goods which are excludable and non-rival are called club goods, and goods which are non-excludable but rival are called common resources. We won’t be focusing on these types of goods, but I’ve mentioned them for completeness)

RivalPrivate GoodCommon Resources
Non-RivalClub GoodPublic Good

Markets are good at providing private goods because

  • by excluding people who don’t pay, consumers are incentivized to pay, which incentivizes producers to produce, and

  • since private goods are rival it is efficient to exclude consumers who aren’t willing to pay (if the benefit to the consumer was greater than the cost, the consumer would be willing to pay).

Public goods challenge markets because

  • consumers who don’t pay can’t be excluded, consumers are incentivized instead to free-ride (i.e. benefit from the good without paying) and thus producers have no incentive to produce.

  • Additionally, even if we could figure out a way to exclude non-payers, (e.g. by executing everyone who doesn’t pay for the asteroid deflection program), it is inefficient to do so (being non-rival means there are no additional costs to non-payers benefiting).

Examples of public goods

  • Information

    • Journalism

    • Prediction markets

    • Scientific research

    • Educational material

  • Media

    • TV series

    • Movies

    • YouTube videos

    • Books

    • Short-stories

    • Art

    • Podcasts

  • Software

  • Safety

    • Neighborhood watches

    • Vaccines and other public health interventions

    • AI safety

    • Military defense

  • Public spaces

    • Public roads

    • Public parks

Isn’t there a clever mechanism to solve the free-rider problem?

This video stuck with me. The fact the public goods are inefficiently provided by the market seems like the main issue with our civilization. Heck, AI Safety is a public good.

The other thing that stuck is that this seems so solvable. Surely, there is a clever mechanism that can fix this issue? So I went to the Wikipedia page of the Free-rider Problem and scrolled to the bottom, and lo and behold it was just sitting there: Dominant Assurance Contracts invented in 1998 by Alex Tabarrok (yes, the same person who presented the video you just watched). There is only one problem: no one is using them.

What is a dominant assurance contract?

(I recommend you watch the first 30 minutes of this video. It’s really good, but if you don’t have time I wrote a short explanation below that you can read instead).

My short explanation of dominant assurance contracts

Suppose there are 10 villagers on an unpaved street. Bob the Builder will pave the street for $90. Each villager is willing to contribute up to $15 to have the street paved. Additionally, there is there is a $1 transaction cost to contributing (e.g. from time spent signing forms, from credit card fees, from opportunity cost of not earning interest on that money, etc.).

If the Bob the Builder gets everyone to contribute, each villager will only have to pay $90 /​ 10 = $9 and profit $15 - $9 - $1 = $5. However, one of the villagers, Free-riding Frank, is hesitant to contribute. Consider Frank’s decision table:

(Frank’s Profit, Others’ Profit)Others Don’t ContributeOthers Contribute
Frank Doesn’t Contribute(0, 0)(15, 4)
Frank Contributes(-1, 0)(5, 5)
  • If nobody contributes then road doesn’t get paved and Free-riding Frank and the other villagers both profit $0.

  • If Frank contributes but the others don’t then Frank pledges $15 dollars (the maximum he is willing to pay) and incurs a transaction cost of $1. Since no one else contributed, Bob was unable to collect $90, so refunds Frank the $15. Frank, however, still incurred the $1 transaction cost.

  • If the others contribute but Frank doesn’t then Free-riding Frank profits $15, but the others pay $90 /​ 9 + $1 = $ 11 and so only profit $4.

  • If Frank and the others all contribute then they all pay $9 dollars, incur a transaction cost of $1 and profit $5.

Looking at the table and holding the others strategy fixed, Free-riding Frank realizes that the dominant strategy in this game is to not contribute (0 vs −1 and 15 vs 5). Of course, everyone else in the village realizes this too and Bob is unable to raise the funds to pave the road.

Suppose Bob changes the game to a Dominant Assurance Contract. Dominant Assurance Contracts have two conditions:

  • Assurance: Bob will only build the road if all 10 villagers contribute.

  • Refund Bonus: Bob puts up $20 of his own money as collateral. If some villagers do not contribute then Bob will refund all villagers that did contribute what they pledged plus an equal share of the collateral: $2 per villager.

Frank’s decision table now looks something like this:

(Frank’s Profit, Others’ Profit)Others Don’t ContributeOthers Contribute
Frank Doesn’t Contribute(0, 0)(0, 1)
Frank Contributes(1, 0)(5, 5)
  • If nobody contributes then road still doesn’t get paved and Free-riding Frank and the other villagers both profit $0.

  • If Frank contributes but the others don’t Frank pays the transaction cost of $1, but since the road was not built, the Bob refunds Frank an additional $2 [Refund Bonus]. Frank profits $1

  • If the others contribute but Frank doesn’t the road does not get built [Assurance]. The other villagers incur $1 transaction costs and get an additional $2 refund [Refund Bonus]. They profit $1

  • If Frank and the others all contribute then they all pay $9 dollars and a transaction cost of $1, the road gets built and everyone profits $5.

Looking at the table and holding the others strategy fixed, Free-riding Frank now sees that the dominant strategy in this game is to contribute (0 vs 1 and 0 vs 5). Of course, everyone else in the village realizes this too and the road gets paved!

Challenges of dominant assurance contracts

If dominant assurance contracts are so great, why is nobody using them?

The problem is that the producers of public goods don’t know about them.

Example: Element is building Matrix, an open-standards chat app (i.e. a public good). Their business model is to give away the code/​standards for free and sell consulting services. Unfortunately, their competitors have undercut them by selling consulting services without contributing back to the code/​standards. On HackerNews you can see their CEO complain about it as “The Tragedy of the Commons”. Except he is not experiencing the tragedy of the commons. He is experiencing the free-rider problem.

If he doesn’t even know what problem he has, he is not going to be able to: google “the free rider problem”; open the Wikipedia page on “the free-rider problem”; scroll to the bottom to find the section titled “Solutions”; and then read about dominant assurance contracts.

People who are trying to produce public goods don’t seem to know that that’s what they are doing, and that dominant assurance contracts are a way to get funding.

My main goal is to give the idea enough airtime so that when people want to produce public goods, the first tool they reach for is a dominant assurance contract.

Do they work in practice?

Research done in a lab shows that dominant assurance contracts reduce failure rate of assurance contracts from 60% to 40%.

I only know of four attempts done in the wild (tell me if you know about more).

  • Donation to The Center for Election Science.

    • Succeeded

    • Raised $300 in donations from 20 people.

    • Some information was publicly provided about the number of people who pledged before the deadline.

    • Final 3 pledges came in the last half hour.

  • Book Review by Arjun Panickssery.

    • Failed

    • 910 or $225/​250

    • No information publicly provided about the number of people who pledged before the deadline.

    • This one failed, but got really close 910 or $225/​$250 for writing a book review! I want to emphasize how ridiculous it is that it got this close. 9 people were willing to pay $25 for a book review of a book that only costs $18! I think if they used a platform like Kickstarter, a kind soul would have seen that they were only $25 dollars away from succeeding and would have donated.

  • Dark Mode for by Austin.

    • Failed(?)

    • Tried to raise $2500 of play money.

    • Pledges were publicly visible

    • I’m not sure how to count this one. They failed to raise $2500 worth of play money but then they implemented dark mode anyway. So the public good was provided, even though the contract failed.

  • Berkeley House Dinners by Arjun Panickssery.

    • Failed

    • Asked for $700

    • Pledges were not publicized before the deadline.

    • Asked for $700 dollars to fund a house dinner. Arjun hasn’t done a write-up of the result, but he failed. Also the in the first few days after publication the payment links weren’t working.

14 doesn’t seem so good. Dominant assurance contracts work in theory so what is going on?

Main problems ignored by theory

The theoretical model of Dominant Assurance Contracts assumes away some things that you have to deal with in the real word

  • Perfect information about pricing: In the example problem above, we assumed that 10 villagers were willing to pay $15 to pave the road. In real life you do not have that information and risk over-pricing/​under-pricing your contract. Presumably the contracts run in the real world that failed were over-priced.

  • Perfect marketing: In the example problem above, we assumed that villagers who would have benefited knew that Bob the Builder was raising funds. In real life you have to market to potential customers and many potential customers will probably not know about your product. It’s possible that the contracts run in the real world failed to reach all potential customers who would have benefited.

  • Game theory/​psychology: In the example above Free-riding Frank was fully aware of the other villagers strategy. In reality we don’t know how other people are going to behave.

  • Shady: Dominant assurance contracts seems gambling-like/​scam-like the same way that crypto-currency does. The top comment on the Berkeley House Dinner Project is “this is a dollar-auction (AKA scam)”, and the second top comment is “Surely this is illegal?”

Solution to pricing problem

I believe the pricing problem can be solved by prediction markets. Book Review, Dark Mode and Berkeley House Dinner all had prediction markets on whether they’d reach their target. The markets were at 90%, 10%, 45%. These probabilities seem consistent with how much money each of the projects raised.

Before we launch a project we could run a multiple-choice prediction market on manifold: “The Project will raise $X”, “The Project will not raise $X”, “The Project will not launch or will launch with a price different from $X”. Only if “The Project will raise $X” is sufficiently high, will we launch the project.

Solution to marketing problem

This problem is not unique to dominant assurance contracts. So it can be solved in the same way everyone else does it.

A cool idea is to partner with someone with expertise in marketing. The advertiser can put up the collateral for the refund bonus. If the project succeeds the producer can give them a cut of the funds raised. In this way, the advertiser is incentivized to make the project to succeed.

Solution to game theory/​psychology

I think having a progress bar showing how many people have pledged so far is incredibly important to reach the target.

  • If the project is not on track to reaching it’s goal, speculators will pledge in order to claim the refund bonus.

  • If the project is on track to reaching it’s goal, prosocial people are likely to pledge so that the project gets funded.

  • If the project is close to reaching it’s goal, but time is running out. Potential free-riders will wait until the very last moment, but eventually concede and pledge their money.

In some sense, with a progress bar, the refund bonus rewards people for providing information on whether the project is likely to reach it’s funding goal.

I suspect the Book Review project would have worked if there was a progress bar.

Solution to looking like a scam.

Personally I think framing it as “You get a Refund Bonus as gratitude for supporting our project which we are very sorry we are unable to deliver” rather than “If you pledge you could win $5!!!!! Buy now!!!!” can make it seem less like a scam.

Having a progress bar also makes it seem less like a scam since it makes it easier for people to predict if the project is going to succeed or fail.


If you price your project correctly (with the help of prediction markets), market it successfully, phrase the refund bonus in a way that it does not seem like a scam and have a progress bar with a list of people who’ve already pledged, then it’s very likely that it will reach it’s target because:

  • it’s rational for people to pledge, furthermore,

  • the refund bonus rewards people for providing information on whether the project will reach it’s funding goal.

Other potential problems

  • Fraud: It’s possible that the project is just a scam, and that the producer disappears with the money.

  • Information asymmetry: It’s possible that the producer is unable to deliver the product because of incompetence or produces a product of lower quality than customers expected.

  • Collateral: The need for collateral that producers need to put up makes risk-averse producers less likely to try, cancelling out the increase in the success rate.

    • Potential solution: If we can get success rate close to 100% then the platform can put up the collateral.

    • Potential solution: Entrepreneurs will be willing to invest if they think they can make a profit (i.e. someone who is risk tolerant can underwrite the collateral).

  • Exclusion: “Won’t people just fund their projects with dominant assurance contracts and then bundle ads or exclude non-payers (e.g. with restrictive copyright) anyway to maximize revenue (e.g. cable TV with ads)?”:

    • Possibly, I think our job is to create a culture where we release things for free and without ads, similar to the current culture in open source software.

    • If dominant assurance contract become popular there is less of a case for patents and copyright so it will be easier to convince policymakers that they should no longer exist.

  • Fees: The happy-path of the financial system is that money flows from consumers to produces. With a refund bonus, money can flow from producers to consumers. The infrastructure for dealing with this use-case is poor and expensive.

Okay so what am I buying?

You’re collectively paying for $629 dollars for 1 month of my time to make this idea a reality. (I don’t live in the Bay Area so my cost of living is low). I don’t really need the money. I’m doing this as a experiment to test that dominant assurance contracts work. I’ll likely ask for additional funding in the future to implement more features after the first month, and for specific expenses as they come up.

The plan is to create a website where public-good producers can create a page that

  • Has a description of the project.

  • Has a progress bar showing how much and who have pledged.

  • Handles payments with PayPal

  • If the project doesn’t reach the funding goal, the customers are automatically refunded with a refund bonus. If the project does reach it’s goal, the producer gets the money in their PayPal account.

  • The producer will put up the refund bonus as collateral using PayPal.

The website is essentially already done (my prototype just has my project hard-coded). I just need to flesh it out so that other people can upload their projects.

The main thing I’m going to doing is looking for people who want to create public goods and getting feedback from them on the platform (if that’s you please join the Refund Bonus Discord or contact me in some other way)

Additionally I want to try some cool things which might not work out like

  • Use prediction markets to price the project.

  • Bring in investors/​advertisers who will put up the collateral on behalf of the producers and take a cut if the project succeeds.

But why can’t I just let other people pay and free-ride?

You haven’t been paying attention. Unless I’ve priced this contract wrong, if you don’t pay it doesn’t happen. If you don’t pay, I don’t meet the goal, everyone gets refunded, I go back to my boring day job, and we continue to live in a world where public goods are under-provisioned.

But won’t someone else do this?

It seems unlikely. The Dominant Assurance Contract paper came out in 1998. And 25 years later, I seem to be the first person to commit to getting it off the ground. You will probably have to wait a while before someone else comes.

The final call to action

If you want to live in a world with no ads or paywalls; a world where open-source software gets the same level of funding as proprietary software; a world where people can freely reuse ideas and music without paying royalties; a world where people get payed for writing book reviews; a world where Game-of-Thrones-quality shows are freely available on Youtube; a world where AI safety research gets the same-level of funding as AI capabilities research, then please pledge some money towards this.

Also please join the Refund Bonus Discord or contact me in some other way if your interested in:

  • Finding people who want to make public goods, putting up collateral on their behalf, marketing their project, and taking a cut if they reach their funding goal.

  • Receiving funding for producing public goods. Even if you don’t want funding, but already produce public goods I’m still interested to talk.

  • Buying public goods on the platform.

Isn’t this just Kickstarter?

Yes, but 60% of Kickstarters fail. That is very bad odds. Research done in a lab shows that dominant assurance contracts reduce failure rate from 60% to 40%. I think this area is very neglected compared to the upside.

“Don’t Contribute” is still an equilibrium on Kickstarter

If we go back to our earlier example, without a refund bonus, due to transaction costs, both “Don’t Contribute” and “Contribute” are both equilibriums (0 vs −1 and 0 vs 5). The refund bonus removes “Don’t Contribute” from the equilibrium.

(Frank’s Profit, Others’ Profit)Others Don’t ContributeOthers Contribute
Frank Doesn’t Contribute(0, 0)(0, −1)
Frank Contributes(-1, 0)(5, 5)

Sure, but this is just a small improvement on Kickstarter. It doesn’t seem revolutionary.

I don’t think enough people are working on this problem. Alex Tabarrok publish his paper on dominant assurance contracts in 1998. Kickstarter was founded in 2009, 11 years later. To this day their are no platforms for dominant assurance contracts to fund public goods.

Most things funded on Kickstarter aren’t even public goods! Their stated mission is to “help bring creative projects to life”. They are even trying to solve the free-rider problem! They just happen to be using a similar mechanism.

I agree dominant assurance contracts are a small improvement, but small improvements add up and almost nobody is working on this!

But why aren’t people using Kickstarter to fund public goods right now?

They are. Here are some successful open-source projects funded by Kickstarter:

Here is an unsuccessful project

Akira got 38% of their target funding. I’d be willing to bet that if they use dominant assurance contracts they would have succeeded.

Apparently 79% of projects that raised more than 20% of their goal were successfully funded. The refund bonus provides the necessary kick (hehe) that gets twice as many projects over the line.

Again, I think the main problem is that people don’t know that assurance contracts (dominant or otherwise) can be used to fund public goods.

But you have no moat. Kickstarter will just copy you.

Yes! I’m not trying to make a bazillion dollars. I just want more public goods! If Kickstarter copies this idea that would be great! Less work for me!

Wait, you said something about AI Safety but this doesn’t apply because...

… AI Capabilities just scale with compute, where as we don’t know how to scale AI Safety. The problem is not funding, and even if it there was a dominant assurance contract for “$1 000 000 000 to solve the alignment problem” there is no guarantee that whoever gets the money will solve the alignment problem.

Yes, there is a information problem when funding research things like AI Safety. We don’t have the information on whether the researcher’s research will be any good. But guess what: information is a public good! That means that it’s currently underfunded. Dominant assurance contracts can bridge that funding gap.

How do we fund information? Of the top of my head a bunch of things come to mind

  • We can fund prizes that will be given to someone who answers a particular research question.

  • We can fund someone to do an analysis of which researchers or research directions seem most promising.

  • We can fund prediction markets on something like “P(doom|give Bob $100,000)” vs “P(doom|don’t give Bob $100,000)”.

Alternatives and their problems

Of course, there are other ways to fund public goods, but they all have their own problems.


Probably the main method to privately produce public goods is by running ads on goods you give away for free. The main issue with this is that ads pay a fraction of a cent per view. That means that you can only fund low-quality/​cheap goods. To see this, compare videos on YouTube with series on HBO.


With taxes you face a symmetric problem to the free-rider problem: the forced-rider problem. Think of someone who doesn’t use a car, but still pays taxes to maintain the roads.

Funding public good through taxes also suffer from lack of market-pricing mechanism. Government spending doesn’t have to pass the market test that a dominant assurance contract has to pass, creating wasteful spending.

Impact Certificates

Impact certificates suffer from the free-rider problem. There isn’t any incentive (other than altruism) to buy an impact certificate. One can just free-ride on the results of the impact project, and let the initial investor go bankrupt.

I think impact certificates are trying to solve the problem of information asymmetry rather than funding. It’s possible that they could be combined with dominant assurance contracts in some way, but I’m not sure how.

Club Goods

A Club Good is a good that is non-rival but excludable. An example would be a subscription to HBO or Microsoft Office. It costs practically nothing on the margin to give an additional person access to HBO or Microsoft Office (all the costs were upfront in production) so these goods are non-rival. However, since HBO and Microsoft charge for these goods they are excludable.

Of course, there is piracy. So the first problem is that it’s actually difficult to turn a public good into a club good, and so the free-rider problem persists.

Secondly, it’s inefficient to exclude people. If you would pay $5 to watch Game of Thrones but the HBO subscription is $15, then $5 of surplus is being lost (it costs HBO $0 to let you watch Game of Thrones).


This is a type of club good.

From personal experience, I think this works okay for art where the patrons have a parasocial relationship with the artist. This seems to work less well for impersonal stuff like software.

Additionally, it’s easy for Buccaneer Bob to sign up to your Patreon and then upload your products to a piracy website. Free-riding Frank won’t bother to sign up to your Patreon, he’ll just download your products off a piracy website.

If you price a dominant assurance contract correctly, Free-rider Frank is forced to pay.


The idea with micropayments is something like “cost per marginal unit is a fraction of a cent so we should make it possible for people to pay fractions of cents.” I think this doesn’t work because the cost of fraud is higher than a fraction of a cent. Also, the cost of me thinking “Is this worth 0.01c?” is higher than a fraction of a cent. It’s just better to treat such things as non-rival.

Assurance Contracts/​Kickstarter

The main issue with an assurance contract without a refund bonus is that “not contributing” is an equilibrium, especially if their are substantial transaction costs. I already explained this above.


Public goods are under-provisioned by the market due to the free-rider problem. Dominant assurance contracts solve the free-rider problem. Nobody is using dominant assurance contracts. To solve this problem, and simultaneously test if dominant assurance contracts work, I created a dominant assurance contract to fund a platform for creating dominant assurance contracts.