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Learning and Incentive Compatible Mechanisms for Public Goods Provision: An Experimental Study

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dc.contributor.author Chen, Yan
dc.contributor.author Tang, Fang-Fang
dc.date.accessioned 2010-03-30T19:50:34Z
dc.date.available 2010-03-30T19:50:34Z
dc.date.issued 1996 en_US
dc.identifier.uri https://hdl.handle.net/10535/5677
dc.description.abstract "This is the first systematic experimental study of the comparative performance of two incentive compatible mechanisms for public goods provision: the Basic Quadratic mechanism by Groves and Ledyard (7 = 1 and 7 = 100) and the Paired-Difference mechanism by Walker. Both mechanisms are Nash-efficient and balanced vvith the same dimensions of message space, and the latter has one advantage over the former in that in equilibrium it is individually rational. However, our experiments demonstrate that the actual Performance of the Basic Quadratic mechanism under a high punishment parameter is far better than the Basic Quadratic mechanism under a low punishment parameter, which, in turn, is better than the Paired-Difference mechanism, evaluated in terms of System efficiency, close to Pareto optimal level of public goods provision, convergence to stage game equilibrium and stability. From this we draw some lessons for mechanism design: Standard considerations, such as incentive compatibility, individual rationality and balanced budget, are not enough to guarantee that these desirable properties can actually be obtained in a dynamic process with human subjects. Other disequilibrium aspects, such as deviation costs which impose incentives for subjects to learn to play their equilibrium strategies, and deviation sensitivity which can either amplify or diminish noise in a system, are also important to induce good dynamics and stability. To understand principles of individual learning behavior, we estimated three static and four dynamic learning models. Variants of the stimulus response models outperform the generalized fictitious play model. The comparative Performance of the three variants of the Stimulus response models are statistically indistinguishable." en_US
dc.language English en_US
dc.subject public goods and bads en_US
dc.subject learning en_US
dc.subject incentives en_US
dc.subject mechanism design en_US
dc.title Learning and Incentive Compatible Mechanisms for Public Goods Provision: An Experimental Study en_US
dc.type Working Paper en_US
dc.type.methodology Case Study en_US
dc.subject.sector Theory en_US

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