The Virtual Commons: Why Free-Riding Can Be Tolerated in File Sharing Networks

Abstract:     
Peer-to-peer networks have emerged as a popular alternative to traditional client-server architectures for the distribution of information goods. Recent academic studies have observed high levels of free-riding in various peer-to-peer networks, leading some to suggest the imminent collapse of these communities as a viable information sharing mechanism.

Our research develops both static and dynamic analytic models to analyze the behavior of peer-to-peer networks in the presence of free-riding. In contrast to previous predictions we find that free-riding is sustainable in equilibrium and in some cases occurs as part of the socially optimal outcome. However, we also show that without external incentives, the level of freeriding in peer-to-peer networks will be higher than the socially optimal level. Finally, we show that quality of service tied to the contribution of content can be used as a lever to induce users to share and thereby achieve the socially optimal outcome for the network.

Keywords: peer-to-peer, free-riding, public goods, club goods, incentives

Working Paper Series