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Voluntary redistribution mechanism in asymmetric coordination games

Masaki Aoyagi, Naoko Nishimura () and Yoshitaka Okano ()
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Naoko Nishimura: Ritsumeikan University
Yoshitaka Okano: Kansai University

Experimental Economics, 2022, vol. 25, issue 2, No 3, 444-482

Abstract: Abstract An inequality game is an asymmetric 2 × 2 coordination game in which player 1 earns a substantially higher payoff than player 2 except in the inefficient Nash equilibrium (NE). The two players may have either common or conflicting interests over the two NE. This paper studies a redistribution scheme which allows the players to voluntarily transfer their payoffs after the play of an inequality game. We find that the redistribution scheme induces positive transfer from player 1 to player 2 in both common- and conflicting- interest games, and is particularly effective in increasing efficient coordination and reducing coordination failures in conflicting-interest games. We explain these findings by considering reciprocity by player 1 in response to the sacrifice made by player 2 in achieving efficient coordination in conflicting-interest games.

Keywords: Equity; Efficiency; Transfer; Reciprocity; Sacrifice; C72; D31; D63 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10683-021-09719-6

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