Centralization vs. Decentralization: First Evidence from the Laboratory

Gabriele Camera, Gary Charness and Nir Chemeya
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Gabriele Camera: ESI, Chapman University
Gary Charness: UC Santa Barbara
Nir Chemeya: Ben-Gurion University of the Negev

Working Papers from Chapman University, Economic Science Institute

Abstract: The future architecture of financial systems is a subject of contention, with centralized and decentralized governance proponents. Here we ask: would the architecture affect the quality of decision-making? We propose a game where financial network participants demarcate the ownership of claims to income. This governance task can be decentralized (shared authority), centralized (single authority), or hybrid (alternating authority). Without communication all architectures supported poor outcomes. With communication, decentralization ensured good governance and maximum profits, while centralization did not—lowering communication’s potency in promoting socially optimal decisions. This indicates there is scope for decentralization in innovating financial institutions.

Keywords: decentralized finance; distributed networks; money; fintech; group decisionmaking; digital payments; currency design; validation; trusted parties (search for similar items in EconPapers)
JEL-codes: D81 G3 G4 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:26-06

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