Equality Concerns and the Limits of Self-Governance in Heterogeneous Populations

Lata Gangadharan (), Nikos Nikiforakis () and Marie Claire Villeval

No 9384, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Mechanisms to overcome social dilemmas provide incentives to maximize efficiency. However, often – such as when agents are heterogeneous – there is a trade-off between efficiency and equality. Agents' concerns for equality in such instances can limit the ability of mechanisms to promote efficiency. We provide evidence for this from a public good experiment using a simple mechanism which allows individuals to communicate periodically with other group members and reward them for their actions. We show that, in homogeneous populations – where there is no tension between efficiency and equality – the mechanism permits group to obtain maximum efficiency. This is not the case in heterogeneous populations where individuals derive different benefits from cooperation. Although almost all heterogeneous groups agree to follow specific contribution rules with positive contributions, most of them either prioritize equality over efficiency or strike a compromise between the two. These findings suggest that equality concerns can impose limits on the ability of heterogeneous populations to reach efficient outcomes through self-governance.

Keywords: heterogeneity; normative conflict; cooperation; rewards; communication (search for similar items in EconPapers)
JEL-codes: C92 D74 H41 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2015-09
New Economics Papers: this item is included in nep-cdm, nep-evo, nep-exp and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - revised version published as 'Equality concerns and the limits of self-governance in heterogeneous populations' in: European Economic Review, 2017, 100, 143-156

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Working Paper: Equality concerns and the limits of self-governance in heterogeneous populations (2016)
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