Procedurally Fair Co-Determination with Endogeneous Value Uncertainty: An Experiment

Werner Güth, Ludivine Martin, Tibor Neugebauer () and Sotiria Xanalatou
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Werner Güth: Max-Planck-Institute for Research on Collective Goods, 53113 Bonn, Germany
Ludivine Martin: Luxembourg Institute of Socio-Economic Research (LISER), 4366 Esch-Sur-Alzette, Luxembourg
Tibor Neugebauer: Department of Finance, University of Luxembourg, 1359 Luxembourg, Luxembourg
Sotiria Xanalatou: Department of Finance, University of Luxembourg, 1359 Luxembourg, Luxembourg

Games, 2025, vol. 16, issue 2, 1-28

Abstract: We present an experimental test of a procedurally fair co-determination mechanism where group members reduce their value uncertainty before submitting bids for a joint project. The results suggest a relatively efficient mechanism, with unprofitable projects being largely rejected and profitable ones accepted. Repeated interactions tended to enhance the efficiency, while uncertain information reduced it. The subjects invested surprisingly little search effort to reduce the uncertainty about the costs and benefits, and appeared to trade off search costs against higher bids.

Keywords: corporate governance; joint venture; experiment; auction; uncertainty (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2025
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