Economics at your fingertips  

Adding noise to the institution: an experimental welfare investigation of the contribution-based grouping mechanism

Heinrich H. Nax (), Stefano Balietti (), Ryan O. Murphy and Dirk Helbing
Additional contact information
Heinrich H. Nax: ETH Zürich
Stefano Balietti: Northeastern University
Ryan O. Murphy: University of Zurich
Dirk Helbing: ETH Zürich

Social Choice and Welfare, 2018, vol. 50, issue 2, 213-245

Abstract: Abstract Real-world institutions dealing with social dilemma situations are based on mechanisms that are rarely implemented without flaw. Usually real-world mechanisms are noisy and imprecise, that is, which we call ‘fuzzy’. We therefore conducted a novel type of voluntary contributions experiment where we test a mechanism by varying its fuzziness. We focus on a range of fuzzy mechanisms we call ‘meritocratic matching’. These mechanisms generalize the mechanism of ‘contribution-based competitive grouping’, and their basic function is to group players based on their contribution choices—i.e. high contributors with high contributors, and low contributors with low contributors. Theory predicts the following efficiency-equality tradeoff as a function of the mechanism’s inherent fuzziness: high levels of fuzziness should lead to maximal inefficiency, but perfect equality; decreasing fuzziness is predicted to improve efficiency, but at the cost of growing inequality. The main finding of our experimental investigation is that, contrary to tradeoff predictions, less fuzziness increases both efficiency and equality. In fact, these unambiguous welfare gains are partially realized already at levels where the mechanism is too fuzzy for any high-efficiency outcome to even be a Nash equilibrium.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... c+theory/journal/355

Access Statistics for this article

Social Choice and Welfare is currently edited by Bhaskar Dutta, Marc Fleurbaey, Elizabeth Maggie Penn and Clemens Puppe

More articles in Social Choice and Welfare from Springer, The Society for Social Choice and Welfare Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-11-06
Handle: RePEc:spr:sochwe:v:50:y:2018:i:2:d:10.1007_s00355-017-1081-5