I agree with this comment except for these two points
About your element/matrix example, the problem is indeed free-riding, but DACs would only solve the problem if he wouldn’t keep developing it unless he got a certain amount of funding (which would make it a coordination problem). If he doesn’t want to condition the development on a certain level of funding, then funding will be based only on the goodwill of people. So DACs also don’t solve cases where a reward is deserved, but you’re gonna do the thing regardless.
I don’t think he is going to do it regardless. Presumably if he doesn’t get enough money he has to shut-down his company completely or reduce the amount he spends on open-source and focus on the more profitable consulting side of the business. If DACs were used they could invest more in the open source.
I think the focus on public goods in the post is a bit confusing. Not because it’s a problem to have and offer that as the main motivation for this, but because it makes it seem like it’s only relevant for public goods, where it’s still as relevant for private goods if there’s a big upfront cost to producing any at all.
Private goods already have a mechanism to solve this problem: investment. That’s why I think DACs are not that relevant for private goods.
In the case where he has a minimum amount below which he is unwilling to continue development, then I agree a DAC would help raise that amount.
Investment solves the funding problem, it doesn’t solve the problem of making sure you have enough buyers. And if you can’t solve the latter then you might not be able to get investors either (cause they also want to know you have enough buyers). That’s the problem Kickstarter solves, and DACs would solve wven better, in addition to funding.
I agree with this comment except for these two points
I don’t think he is going to do it regardless. Presumably if he doesn’t get enough money he has to shut-down his company completely or reduce the amount he spends on open-source and focus on the more profitable consulting side of the business. If DACs were used they could invest more in the open source.
Private goods already have a mechanism to solve this problem: investment. That’s why I think DACs are not that relevant for private goods.
In the case where he has a minimum amount below which he is unwilling to continue development, then I agree a DAC would help raise that amount.
Investment solves the funding problem, it doesn’t solve the problem of making sure you have enough buyers. And if you can’t solve the latter then you might not be able to get investors either (cause they also want to know you have enough buyers). That’s the problem Kickstarter solves, and DACs would solve wven better, in addition to funding.