Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/124900
Authors: 
Gangadharan, Lata
Nikiforakis, Nikos
Villeval, Marie Claire
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 9384
Abstract: 
Mechanisms to overcome social dilemmas provide incentives to maximize efficiency. However, often – such as when agents are heterogeneous – there is a trade-off between efficiency and equality. Agents' concerns for equality in such instances can limit the ability of mechanisms to promote efficiency. We provide evidence for this from a public good experiment using a simple mechanism which allows individuals to communicate periodically with other group members and reward them for their actions. We show that, in homogeneous populations – where there is no tension between efficiency and equality – the mechanism permits group to obtain maximum efficiency. This is not the case in heterogeneous populations where individuals derive different benefits from cooperation. Although almost all heterogeneous groups agree to follow specific contribution rules with positive contributions, most of them either prioritize equality over efficiency or strike a compromise between the two. These findings suggest that equality concerns can impose limits on the ability of heterogeneous populations to reach efficient outcomes through self-governance.
Subjects: 
communication
rewards
cooperation
normative conflict
heterogeneity
JEL: 
C92
H41
D74
Document Type: 
Working Paper

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