With the pragmatarian approach to Netflix, subscribers would still be able to watch all the content, but they’d have the option to use their subscription dollars to signal the importance of specific content.

They’d still be limited. They cannot allocate more than (a fraction) of your monthly sub. You could argue that this actually calibrates things, but that is not necessarily so. You may judge that your Netflix subscription is worth way more than $10 because of the movies it allows you to watch, whereas for your neighbour it’s just marginal. He watches just two westerns each month, while you watch 8 indie movies, 3 silent movies, 6 French films noirs and 2 documentaries. Yet you both have the same amount of money to allocate.

In addition the allocation doesn’t represent an actual sacrifice: they’ve already paid anyway, and (from a (behavioural) economics perspective) that is important to express, er, importance. :-)

In one year I would have spent $48 dollars on The Man From Earth. The reason that my valuation is so high is because I perceive a severe scarcity/shortage of movies that combine education and entertainment.

Well you say that, but it could have been interpreted as a signal of a shortage of movies about academia, with Beethoven in the soundtrack, with a low budget, or even indie movies in general.

With actual consumption goods you can signal “I want more of this”, but with AKU, Netflix, Medium etc, you are signalling “I want more like this”, which is open to interpretation. Not a problem in theory, but very much so in practice.

But with the pragmatarian system, the people who really enjoyed this movie would have the opportunity to reveal the true depth of their demand.

This, we have agreed before, is a very important feature. What we’re really trying to measure is (in economics terms) the consumer surplus. That is the principal case for pragmatarian markets.

but it still wouldn’t allow me to show the full depth of my demand like a pragmatarian system would allow. It really doesn’t benefit me to hide any of my passion from creators.

No, that is true. But (a) all you want is some way of discriminating between the various offers, and (b) the purist pragmatarian view, namely that you should pay your full valuation, is highly distortive.

OPFA-plus sends out a signal and an incentive. You could even make it unlimited, so you could pay 10 times the ‘market’ rate for The Man From Earth, much of which would go to… well, to whom? Would you want the same crew making the same kind of film?

The second concern is that, by paying so much that your consumer surplus disappears, you actually end up being worse off. Not only is the net utility a lot lower, you also have no money left to pay for the next movie that your signal has caused to be offered.

My willingness to make a relatively big sacrifice for The Man From Earth,

See above: it’s not really a sacrifice.

But the size of my sacrifice, which is based on my solid information, would influence other people’s allocation decisions. So they would make allocation decisions as if they had the same exact solid information that I do.

I agree with all that (as I think you know :-))

Maximizing the amount of essential information that is utilized in allocation decisions depends entirely on people making sacrifices that accurately reflect their true valuations.

I am not so sure, for the reason I mentioned before: market price. The market failure for old and foreign films is not so much the lack of a good pricing mechanism, it’s the barriers to entry and the network effect of the likes of Netflix. We may have a Hotelling problem here: every platform wants to be in the mainstream, and as long as capacity is limited for (or there is non-trivial effort involved in) offering obscure films, there is no perceived incentive for them to do so. And a provider that only does obscure stuff runs into the barriers to entry.

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Accidental behavioural economist in search of wisdom. Uses insights from (behavioural) economics in organization development. On Twitter as @koenfucius

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