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Fair share and social efficiency: A mechanism in which peers decide on the payoff division

Lu Dong, Rodney Falvey () and Shravan Luckraz ()

Games and Economic Behavior, 2019, vol. 115, issue C, 209-224

Abstract: We propose and experimentally test a mechanism for a class of principal-agent problems in which agents can observe each others' efforts. In this mechanism each player costlessly assigns a share of the pie to each of the other players, after observing their contributions, and the final distribution is determined by these assignments. We show that efficiency can be achieved under this simple mechanism and, in a controlled laboratory experiment, we find that players reward others based on relative contributions in most cases and that the players' contributions improve substantially and almost immediately with 80 percent of players contributing fully.

Keywords: Experimental economics; Fairness; Mechanism design (search for similar items in EconPapers)
JEL-codes: C92 D63 H41 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Fair share and social effciency: a mechanism in which peers decide on the payoff division (2016) Downloads
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DOI: 10.1016/j.geb.2019.02.016

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