Minority vs. Majority: An Experimental Study of Standardized Bids

30 Pages Posted: 18 Mar 2008

Date Written: March 2008

Abstract

Due to its simplicity the plurality voting system is frequently used to choose a common representative or project. Nevertheless it may fail to provide a socially efficient decision as a majority can outvote any minority even if the majority's gain does not compensate the loss suffered by the minority. In this paper we propose and study a simple mechanism that allows voters to reveal more information about their preferences over the candidates. According to the standardized bids mechanism voters report a bid for all the available projects. Standardization ensures the existence of equilibrium, and delivers incentives to overcome the problem of positive and negative exaggeration. Our experimental results show that the standardized bids mechanism performed well in the laboratory as it chose the efficient project in almost three quarters of the cases, and induced truthful reports of project rankings in approximately 90% of the cases. For a reference, we also present experimental results for the plurality voting scheme.

Keywords: efficiency, experiments, mechanism design, public project, uncertainty, voting

JEL Classification: C92, D71, D82

Suggested Citation

Veszteg, Robert Ferec, Minority vs. Majority: An Experimental Study of Standardized Bids (March 2008). Available at SSRN: https://ssrn.com/abstract=1107083 or http://dx.doi.org/10.2139/ssrn.1107083

Robert Ferec Veszteg (Contact Author)

University of the Basque Country ( email )

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

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