Institutional Solutions to Free-Riding in Peer-to-Peer Networks : A Case Study of Online 'Pirate' Communities

Self-governance of common pool resources is presumed to work well in small, homogeneous communities where interaction is repeated, agents have low discount rates, and information about past performance is available. It is presumed to work poorly elsewhere. This paper provides a case study of online communities who use peer-to-peer networks to illegally share copyrighted material — 'Pirates' — to investigate the robustness of self-governance institutions in less favorable conditions. Early models of peer-to-peer networks predicted complete collapse due to issues of free-riding. When these networks are used to illegally share copyrighted material, the increased risk of legal punishment leads to a further disincentive to contribute. Despite the increased incentive to free-ride, online pirate communities have developed a robust set of institutional mechanisms designed to mitigate the effects of free-riding in the network. My study highlights the diversity, and commonality, of institutional arrangements developed by self-governing communities to solve collective action problems under unfavorable conditions