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Near-efficient Equilibria in Contribution-based Competitive Grouping

Title data

Gunnthorsdottir, Anna ; Vragov, Roumen ; Seifert, Stefan ; McCabe, Kevin:
Near-efficient Equilibria in Contribution-based Competitive Grouping.
In: Journal of Public Economics. Vol. 94 (December 2010) Issue 11-12 . - pp. 987-994.
ISSN 1879-2316
DOI: https://doi.org/10.1016/j.jpubeco.2010.07.004

Abstract in another language

We examine theoretically and experimentally how competitive contribution-based group formation affects incentives to free-ride. We introduce a new formal model of social production, called a “Group-based Meritocracy Mechanism” (GBM), which extends the single-group-level analysis of a Voluntary Contribution Mechanism (VCM) to multiple groups. In a GBM individuals are ranked according to their group contributions. Based on this ranking, participants are then partitioned into equal-sized groups. Members of each group share their collective output equally amongst themselves according to a VCM payoff function. The GBM has two pure-strategy Nash equilibria. One is non-contribution by all; this equilibrium thus coincides with the VCM's equilibrium. The second equilibrium is close to Pareto optimal. It is asymmetric and quite complex from the viewpoint of experimental subjects, yet subjects tacitly coordinate this equilibrium reliably and precisely. Extensions of the basic GBM model to incorporate various features of naturally occurring group formation are suggested in the conclusion.

Further data

Item Type: Article in a journal
Refereed: Yes
Additional notes: JEL classification: D20, C72, C92
Keywords: Endogenous group formation; Free-riding; Social dilemma; Tacit coordination; Mechanism design; Non-cooperative game theory; Equilibrium selection; Experiment
Institutions of the University: Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration XI > Chair Business Administration XI - Univ.-Prof. Dr. Stefan Seifert
Research Institutions > Research Units > Research Centre for Family Enterprises
Faculties
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration XI
Research Institutions
Research Institutions > Research Units
Result of work at the UBT: No
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 17 Feb 2014 10:49
Last Modified: 17 Feb 2014 10:49
URI: https://eref.uni-bayreuth.de/id/eprint/152