Virtual communities constitute a building block of the information society. These organizations appear capable to guarantee unique outcomes in voluntary association since they cancel physical distance and ease the process of searching for like–minded individuals.

In particular, open source communities, devoted to the collective production of public goods, show efficiency properties far superior to the traditional institutional solutions to the public goods issue (e.g. property rights enforcement and secrecy).

This paper employs team and club good theory as well as transaction cost economics to analyse the Wikipedia online community, which is devoted to the creation of a free encyclopaedia. An interpretative framework explains the outstanding success of Wikipedia thanks to a novel solution to the problem of graffiti attacks — the submission of undesirable pieces of information. Indeed, Wiki technology reduces the transaction cost of erasing graffiti and therefore prevents attackers from posting unwanted contributions.

The issue of the sporadic intervention of the highest authority in the system is examined, and the relatively more frequent local interaction between users is emphasized.

The constellation of different motivations that participants may have is discussed, and the barriers–free recruitment process analysed.

Open source software constitutes the most popular and successful example of purpose–built community, characterized by cumulative dependency. Concerning the size of open source projects as a criterion for their classification, Krishnamurthy (2002) found that the community model is a poor fit for software production. Indeed, the top 100 mature projects on Sourceforge [3], are developed by one or a few individuals. However, Krishnamurthy does not argue that such result implies a sort of crisis in the open source community; as the author correctly recognises, large communities may exist and do things other than produce software. For example, communities may try out products and suggest new features.

Wikipedia.com was born in January 2001 as a complementary project of Nupedia.com, which was aiming to create a freely available online encyclopaedia [4]. The publication of articles on Nupedia, in order to maintain high–quality, was based on a traditional review procedure of the publishers responsible for coordinating the project. The result of such process was that the volunteer contributors had to face a long and deterrent itinerary of submission, review and, if necessary, negotiation that ended up in very few articles published. At this point, the idea of Wikipedia emerged as a laboratory in which the advantages of massive collaboration could have been exploited, with the intention of choosing the best articles and letting them take the hard and costly review path leading to Nupedia.

The project has been successful. Six months after the birth of Wikipedia, 6.000 articles were written. Currently, there are more than 170,000 articles. [...]

Wikipedia is based on the Wiki technology that characterizes many Web sites. A Wiki community is open in the sense that it allows anyone to participate, freely viewing information contained in a site, permitting editing of that information as well. Editing Web pages can be done without submitting changes to a publisher and negotiating for them.

Why does this approach work? One might assume that graffiti attacks would eventually frustrate an approach on this sort of large scale. However, Wikipedia has been successful with a great deal of notable content as well as content in a state of constant improvement. For the most part, content disasters — in terms of quality — have not occurred. [...]

Wiki technology in a way literally cancels transaction costs for editing and changing information. Hence, this reduction in transaction costs acts as a catalyst for the development of the community. In turn, these reduced transaction costs means that there is full exploitation of massive collaboration economies. Hence, in the case of horizontal information assemblages, we might argue that any incentive that allows more authors to freely join in a given task, the larger the assemblage of information that is eventually produced (or in the case of Wikipedia, a larger number of articles is possible).

Another secret of the success of Wikipedia is related to the incentives that contribute to a "creative construction" of information, rather than a "creative destruction" of it. As noted earlier, I expected Wikipedia to be engaged in an endless war among reliable contributions and graffiti attacks that would have blocked the development of the Web site. In reality, that has not happened, basically because all changes made to any article are stored; it is possible to undo any unapproved modification with a single click. This makes the activity of littering a page extremely more expensive for an individual (in terms of time and reputation), than it is for anyone else. Therefore, also in this circumstance, it is a matter of costs.

Through this mechanism of editing and undoing meaningless changes or graffiti, an evolutionary process is fostered and only the best contributions survive the selection (Neus, 2001). Moreover, other factors contribute to Wikipedia’s success such as sources of authority and coordination. [...]

Whilst registered users can write articles, edit and discuss changes, administrators can exercise a certain degree of institutional authority. Indeed, they are allowed to ban IP addresses and permanently delete pages and their history. Such actions are undertaken when specific users are responsible for graffiti attacks, or when their writings and edits are not completely objective. Hence it is a general rule of the community that articles should be written from a neutral point of view. For example, one user was banned, who had written numerous contributions on German history [11]. These articles were perceived as right–wing by most, hence ignoring this standard of neutrality. In this case, the decision for banning the user was secured only after a long and lively discussion on the mailing list. [...]

Final policy decisions are up to one of the founders, Jimmy Wales. However, if this sort of benevolent dictator attempted to deviate from a neutral and objective policy towards content (for example, in order to push a specific political agenda), then the license provides a strong counter–balance to his power. The contributors may and should, in such a case, take the database and the software and set up a competing project. [...]

The case of Wikipedia, a successful project committed to the creation of a free online encyclopaedia, was examined. The principal reasons for the success of Wikipedia — namely, the drop in the transaction costs of submitting contributions and erasing graffiti — were described. It was shown how procedural and institutional authorities work for this site. In particular, the importance of reputation, as a source of authority, was emphasized. Reputation is accumulated through participation and that shapes a system of distributed authority in which every participant potentially may have a role in the development of the project.