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On a mechanism that improves efficiency and reduces inequality in voluntary contribution games

Rodney Falvey (), Tom Lane () and Shravan Luckraz ()

No 2022-15, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: We consider the class of linear voluntary contribution games under the general assumption of heterogeneous endowments. In this context, we assess the performance of the Galbraith Mechanism (GM) relative to a fixed equal sharing allocation in both theory and experiments. Three main empirical results emerge. First, the GM raises average contributions significantly above those under an equal-shares allocation. Second, the GM simultaneously reduces income inequality as it improves efficiency. Third, a player's contribution and allocation behaviour is sensitive to her position in the endowment distribution. In all their decision-making, agents consistently place greater emphasis on contribution levels when they are rich, and on contribution ratios (contributions relative to endowments) when they are poor.

Date: 2022
New Economics Papers: this item is included in nep-gth
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