Honour systems and gift exchange

The lurgy-stricken Justin draws attention to some flaws and benefits in honour systems:

The new Radiohead album has soothed my fevered brow today. It’s amazing. I am now quite ashamed at the piffling amount I paid for it.

The flaw in the system highlighted by this is that even people of goodwill might underpay, simply because they don't know the quality of the product.
The benefit of the system is that when people do this, they do feel ashamed.
Which raises the question: how can this shame be put to economic use?
The obvious way is through repeated transactions. In the case of Freakonomics' bagel seller (pdf), if someone underpaid one day, shame and guilt would often make them over-pay the next day.
Can Radiohead benefit in a similar way? In theory, yes. Justin could pay, unnecessarily, to download the album again. Or he could by merchandise that he wouldn't otherwise buy.
In this sense, Justin's dealings with Radiohead would be a gift exchange. Radiohead give him a better album than he expected and he in turn gives them money for stuff he doesn't really want.
However, one other route - for Justin to pay more for Radiohead's next album released on an honour system basis - might not work, because it'll be months before the album comes out and in this time Justin will forget his shame.
The message is that honour system payments work best in reiterated transactions.
And these are more common than thought. George Akerlof famously described labour contracts as partial gift exchanges: employers pay us more than necessary, and in exchange we work harder than necessary - or pretend to, which is just as good.

Comments

[Jock]

I was thinking about this last night for some reason - I'm not particularly a Radiohad fan so didn't rush to download it, but I just assumed that if I downloaded it and liked it, I would download it again and this time pay for it. Probably buggers up the charts mind you! I haven't visited the site at all - but what i tend to like is with Open Source Software where people just put a donation button next to the download - I download it, see if it does what I need and then return and make a donation.

[Mark Wadsworth]

Radiohead (top band that they are) should have released one song per week for a couple of months. So that gives us the reiteration we need. That's that fixed.

[mat]

You know, I've always hoped to be able to pay my taxes on an honour system. Still waiting...

[Sam]

He can always buy the album for a trifling amount, and if he likes it, go and buy another copy for whatever he thinks it's worth.

The mechanism is there - he just has to want to do it.

[Katherine]

He and you both assume I think that the piffling amount paid would be less than if he'd gone down to the record store and bought the CD. COnsidering the various costs involved in pressing, shipping, distributing and retailing a CD, the amount that goes to an artist is also piffling. Anyone know if it is more or less piffling than the average an online downloader might pay?

[Phil]

"employers pay us more than necessary, and in exchange we work harder than necessary"

I'm currently employed on an hourly rate. What actually happens is that I go into work five days a week and stay there almost as long as I did when I had a proper contract, but formally I'm paid £x per hour spent teaching plus £y per hour spent on research, plus a bit for teaching preparation, and, er, that's it.

It's not motivating.