Meritocratic matching can dissolve the efficiency-equality tradeoff: the case of voluntary contributions

Heinrich H. Nax, Stefano Balietti, Ryan O. Murphy and Dirk Helbing

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: One of the fundamental tradeoffs underlying society is that between efficiency and equality. The challenge for institutional design is to strike the right balance between these two goals. Game-theoretic models of public-goods provision under ‘meritocratic matching’ succinctly capture this tradeoff: under zero meritocracy (society is randomly formed), theory predicts maximal inefficiency but perfect equality; higher levels of meritocracy (society matches contributors with contributors) are predicted to improve efficiency but come at the cost of growing inequality. We conduct an experiment to test this tradeoff behaviorally and make the astonishing finding that, notwithstanding theoretical predictions, higher levels of meritocracy increase both efficiency and equality, that is, meritocratic matching dissolves the tradeoff. Fairness considerations can explain the departures from theoretical predictions including the behavioral phenomena that lead to dissolution of the efficiency-equality tradeoff.

Keywords: public-goods; meritocratic matching; efficiency; fairness; inequality (search for similar items in EconPapers)
JEL-codes: C92 D02 D63 H41 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2015-05-08
New Economics Papers: this item is included in nep-cbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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