Optimal Policies and Socially Oriented Behavior: Some Problematic Effects of an Incentive Compatible Device

Norman Frohlich and Joe Oppenheimer

Public Choice, 2003, vol. 117, issue 3-4, 273-93

Abstract: Mancur Olson was pivotal in identifying the formal structure of collective action and the problems of achieving optimal social outcomes with it. Using experimental methods, an incentive compatible device is introduced in a 5-person prisoner's dilemma. The arrangements reflect constructs of Harsanyi and Rawls designed to identify optimal and fair outcomes. The device moves groups towards optimality but its removal negatively affects subsequent behavior, compared to a control with no ICD. This spill-over problem seems to reflect a weakened connection between socially oriented values and behavior, suggesting that ICD's may have unanticipated negative externalities. Copyright 2003 by Kluwer Academic Publishers

Date: 2003
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