This situation has two stable outcomes, one in which nobody cheats, and the other in which everybody cheats. The everybody-cheats outcome is stable because each player figures that he has only a 1/26 chance of facing enforcement, and a 1/26 chance of losing $10 is not enough to scare him away from the $1 he can get by cheating.

It might seem that deterrence doesn’t work because the cheaters have safety in numbers. It might seem that deterrence can only succeed by raising the penalty to more than $26. But here comes Kleiman and Kilmer’s clever trick.

The enforcer gets everyone together and says, “Listen up, A through Z. From now on, I’m going to punish the cheater who comes first in the alphabet.” Now A will stop cheating, because he knows he’ll face certain punishment if he cheats. B, knowing that A won’t cheat, will then realize that if he cheats, he’ll face certain punishment, so B will stop cheating. Now C, knowing that A and B won’t cheat, will reason that he had better stop cheating too. And so on … with the result that nobody will cheat.

Interesting application of game theory. Hope the RIAA is dumb enough not to use it.