Give and Let Give: Alternative Mechanisms Based on Voluntary Contributions

9 Pages Posted: 10 Apr 2019

Date Written: March 18, 2019

Abstract

We propose a new family of mechanisms, whereby players may give more or less directly to one another. A corner 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 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 actions problems currently implemented as LPGMs when it is feasible to gain some information concerning who has concern for whom.

Keywords: voluntary contributions, pro-social preferences, mechanism design

Suggested Citation

Grech, Philip, Give and Let Give: Alternative Mechanisms Based on Voluntary Contributions (March 18, 2019). Available at SSRN: https://ssrn.com/abstract=3353104 or http://dx.doi.org/10.2139/ssrn.3353104

Philip Grech (Contact Author)

ETH Zürich ( email )

Weinbergstrasse 56/58
WEV K513
Zurich, 8092
Switzerland

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