Abstract
We propose a new family of mechanisms, whereby players may give more or less directly to one another. A cornerstone case is the regular linear public goods mechanism (LPGM), where all contribute into a single common group account, the total amount of which is then distributed equally among players. We show that with sufficiently (yet not necessarily fully) pro-social preferences, the social optimum can be reached in Nash equilibrium in all social dilemma situations described by our mechanisms (including the LPGM). In addition, for a given heterogeneity of pro-social preferences, we help to identify which specific mechanisms perform best in terms of incentivizing giving. Our results are therefore relevant from two vantage points. One, they provide proper rational choice benchmarks based on Nash equilibrium under the assumption of other-regarding preferences. Two, they provide arguments in favor of re-structuring many collective action problems currently implemented as LPGMs when it is feasible to gain some information concerning who has concern for whom.
Highlights
Humans often depend on mechanisms facilitating mutual help, support, or charity
In the present note, where we focus on linear Public goods mechanisms (PGMs) (LPGMs), we show that this prediction can change quite drastically if we assume that individuals have other-regarding preferences
We show that for suitably “localized” concerns, fundamental corollaries can be drawn in quite general terms, thereby unveiling conditions for the existence of simple welfare-superior alternatives to the LPGM based on giving circles mechanisms” (GCMs)
Summary
Humans often depend on mechanisms facilitating mutual help, support, or charity. Public goods mechanisms (PGMs), as introduced by Marwell and Ames [1], are archetypal schemes of this kind: they are among the most widely studied in experimental economics, and many real-world situations are modeled as such: the public good is produced only if individuals overcome selfish and strategic incentives to free-ride. given narrowly selfish preferences (and without additional components such as punishment, reputation, etc.), this is standardly not the case, and the outcomes are inefficient. In the present note, where we focus on linear PGMs (LPGMs), we show that this prediction can change quite drastically if we assume that individuals have other-regarding preferences. the assumption is that players have heterogeneous “concerns” for the Marwell and Ames [1] used the terminology of “voluntary contribution mechanism” instead; see Footnote 6 below. Which specific candidate of this family of mechanisms will lead to full contributions and potentially to a social optimum is a difficult question, as it depends on the basic constituents of the game (i.e., rate of return, population size), and on the detailed psychology of the players in terms of how others are affected by their concerns. We show that for suitably “localized” concerns, fundamental corollaries can be drawn in quite general terms, thereby unveiling conditions for the existence of simple welfare-superior alternatives to the LPGM based on GCMs. We point out situations in which such mechanisms may be fruitful and hope to contribute toward finding better mechanisms to support voluntary contributions in collective action problems.
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