Stability and welfare of 'merit-based' group-matching mechanisms in voluntary contribution game

Heinrich H. Nax, Ryan O. Murphy and Dirk Helbing

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the stability and welfare properties of merit-based (meritocratic) group-matching mechanisms in voluntary contribution games. Meritocratic matching in this context means that players tend to be assortatively grouped according to their contributions. We let regimes di ffer from one another with respect to their matching fidelity. The stability analysis summarizes as follows. When there is not enough meritocracy, the only equilibrium state is universal free-riding. Above a first threshold, several Nash equilibria above free-riding emerge, but only the free-riding equilibrium is stochastically stable. There exists a second meritocratic threshold, above which an equilibrium with high contributions becomes the unique stochastically stable state. This operationalization of meritocracy sheds light on critical transitions, that are enabled by contribution-assortative matching, between equilibria related to "tragedy of the commons

Keywords: meritocracy; voluntary contribution; public goods; stochastic stability; evolutionary stability; assortative matching; welfare; efficiency-equality tradeoff (search for similar items in EconPapers)
JEL-codes: C73 D02 D63 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014-10-21
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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