Tacit Coordination and Equilibrium Selection in a Merit-Based Grouping Mechanism: A Cross-Cultural Validation Study

Gunnthorsdottir, Anna; Thorsteinsson, Palmar

doi:10.2139/ssrn.1883465

Cited by 4 publications

(6 citation statements)

References 19 publications

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“…Theory predicts existence of high-efficiency equilibria for LOW-, HIGH-and PERFECT-MERIT, but not for INSUFFICIENT-and NO-MERIT. We shall show that play coordinates on these high equilibria where they exist, which replicates previous experimental results for PERFECT-MERIT Gunnthorsdottir and Thorsteinsson 2011;. Indeed, the levels of efficiency supported by the 'high' equilibria under LOW, HIGH and PERFECT-MERIT approximate well theoretical predictions, while the inefficiency prediction of the 'zero' equilibrium under no-meritocracy (INSUFFICIENT and NO-MERIT) largely understates the achieved efficiency levels.…”

Section: Efficiencysupporting

confidence: 81%

“…These new equilibria are characterized by an asymmetric strategy profile such that a vast majority of players contributes fully and a small minority of player free-rides. 7 Several recent lab experiments confirm coordination on the asymmetric high-efficiency equilibria with high aggregate precision Gunnthorsdottir and Thorsteinsson 2011;Rud and Rabanal 2015).…”

Section: Introductionmentioning

confidence: 90%

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Adding noise to the institution: an experimental welfare investigation of the contribution-based grouping mechanism

et al. 2017

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Real-world institutions dealing with social dilemma situations are based on mechanisms that are rarely implemented without flaw. Usually real-world mechanisms are noisy and imprecise, that is, which we call 'fuzzy'. We therefore conducted a novel type of voluntary contributions experiment where we test a mechanism by varying its fuzziness. We focus on a range of fuzzy mechanisms we call 'meritocratic matching'. These mechanisms generalize the mechanism of 'contribution-based competitive grouping', and their basic function is to group players based on their contribution choices-i.e. high contributors with high contributors, and low contributors with low contributors. Theory predicts the following efficiency-equality tradeoff as a function of the mechanism's inherent fuzziness: high levels of fuzziness should lead to maximal inefficiency, but perfect equality; decreasing fuzziness is predicted to improve efficiency, but at the cost of growing inequality. The main finding of our experimental investigation is that, contrary to tradeoff predictions, less fuzziness increases both efficiency and equality. In fact, these unambiguous welfare gains are partially realized already at levels where the mechanism is too fuzzy for any high-efficiency outcome to even be a Nash equilibrium.

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Section: Efficiencysupporting

confidence: 81%

Section: Introductionmentioning

confidence: 90%

Adding noise to the institution: an experimental welfare investigation of the contribution-based grouping mechanism

et al. 2017

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“…5 We call these equilibria "high-contribution equilibria". We call the threshold for which these equilibria exist mpcr; note that this threshold is increasing in the relative group size s/n, which implies that it is, ceteris paribus, harder (easier) to satisfy for relatively large groups (populations) High-contribution equilibria are particularly interesting, because several recent experimental studies provide support for them [5,19,20]. In fact, recent evidence suggests that players may endogenously implement variants of contribution-based competitive grouping over time and then converge to the high-contribution equilibria [21].…”

Section: Game 1: 'Baseline'mentioning

confidence: 99%

“…As n → ∞, by the law of large numbers, we can use the same bounds obtained for the high-contribution pure-strategy Nash equilibrium to bound (B/n) ∈ [(n − u)/n, (n − l)/n], which converges to the unique p for which Expression (A6) actually holds. 19 Suppose all players contribute with probability p corresponding to the near-efficient symmetric mixed-strategy Nash equilibrium limit value. Then, lim n→∞ V [(B/n)] = lim n→∞ p(1−p) n = 0 for the actual proportion of contributors.…”

Section: Appendix A2 Fuzzy Mechanismmentioning

confidence: 99%

“…Indeed, if players were to belong only to two endowment classes, Gunnthorsdottir et al [23] prove that there might exist an equilibrium where every player contributes everything. This equilibrium, however, requires conditions that become harder to satisfy the more classes of endowments are introduced, eventually becoming impossible if there are as many levels of endowment as there are players.Interestingly, Gunnthorsdottir et al [19,23] also find empirical support for the high-efficiency equilibria by showing that, when existing, near-efficient equilibria are re-preferred over the worst ones. …”

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confidence: 96%

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Contribution-Based Grouping under Noise

Nax

Murphy

Duca

et al. 2017

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Many real-world mechanisms are "noisy" or "fuzzy", that is the institutions in place to implement them operate with non-negligible degrees of imprecision and error. This observation raises the more general question of whether mechanisms that work in theory are also robust to more realistic assumptions such as noise. In this paper, in the context of voluntary contribution games, we focus on a mechanism known as "contribution-based competitive grouping". First, we analyze how the mechanism works under noise and what happens when other assumptions such as population homogeneity are relaxed. Second, we investigate the welfare properties of the mechanism, interpreting noise as a policy instrument, and we use logit dynamic simulations to formulate mechanism design recommendations.Keywords: voluntary contributions; behavioral economics; noise; heterogeneity; mechanism design; welfare; efficiency; equality JEL Classification: C73; D02; D03; D63 MotivationTypically, individual decisions in social-dilemma interactions are not perfectly observable in the real world. Applied mechanism designers should keep this in mind when implementing mechanisms, in particular in the context of interactions that have the strategic nature of voluntary contribution games where imperfect observability is ubiquitous. 1 Real-world institutions are usually "noisy" or "fuzzy", operating with non-negligible degree of imprecision. By contrast, theory investigations of mechanisms for the most part study perfect mechanisms. In this paper, as a first step towards performing robustness checks of mechanisms under relaxed assumptions more generally, we investigate the mechanism of contribution-based competitive grouping (as introduced by [5]): we relax some assumptions and investigate what happens when there is (i) noise, (ii) heterogeneity and (iii) different action spaces.The paper is structured as follows. Next, we introduce our model. In Section 3, we first analyze how the existence of Nash equilibria depends on (iii) the strategy space of the game and on (ii) the underlying population homogeneity/heterogeneity in terms of contribution budgets. Then, we assess their robustness when we allow more and more (i) monitoring noise. In Section 4, we investigate how a social planner, interpreting monitoring noise and/or the other model characteristics as policy instruments, would trade-off efficiency and equality to maximize social welfare. Finally, we use agent-based simulations to study the logit dynamics of the game in order to quantify the effect of noisy monitoring. 1 For other social-dilemma contexts, see, for example, [1,2] for imperfect public monitoring, [3] for noisy prisoners' dilemmas and [4] for team-production games with group-level information. Our results are summarized as follows. In terms of the existence of Nash equilibria, the zerocontribution outcome is always a Nash equilibrium and becomes the unique one under too much noise. High-contribution equilibria exist if three things come together: the rate of return of the underlyin...

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