George Mason University economist Alex Tabbarok describes an MIT team's very clever prize-winning problem solving to the DARPA Network challenge last week.
Earlier this week DARPA, the Defense Advanced Research Projects Agency, moored ten, 8 ft red, weather balloons in undisclosed locations across the United States.
The DARPA Network Challenge offered a prize of $40,000 to the person or group who first identified all the locations.
The MIT Group which won the challenge used a clever pyramid incentive scheme. Each balloon was worth $4000. The person to identify the location earned $2000. The person who invited that person to join the MIT group got $1000, the person who invited the person who invited the person who located the balloon got $500 and so forth (any money not distributed in this way was given to charity.)
The incentive scheme meant that contestants not only had an incentive to find balloons they had an incentive to find someone who could find balloons (or find someone who could find someone who could find balloons and so forth).
Incredibly, the MIT team located all ten balloons in just under 9 hours! The challenge may seem frivolous but in fact is a great example of how prizes and network technologies can combine to collect and use highly dispersed information--a problem of very general interest and relevance.
For those Albany Area Math Circle members working with middle school students, you can turn this news into an interesting math challenge. If you think about it, when the MIT team set up their prize-winning approach, they didn't know how long a chain of people it would take to find each balloon. It's possible that some of the chains could have hundreds or thousands of people in them. How did they know they'd have enough money to pay all the prizes they were offering?