The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally

33 Pages Posted: 18 May 2013 Last revised: 18 Sep 2013

See all articles by Takehito Masuda

Takehito Masuda

Osaka University - Institute of Social and Economic Research

Yoshitaka Okano

Kochi University of Technology - Research Center for Social Design Engineering, School of Management

Tatsuyoshi Saijo

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: September 18, 2013

Abstract

We propose the minimum approval mechanism (MAM) for a standard linear public good environment with two players. Players simultaneously and privately choose their contributions to the public good in the first stage. In the second stage, they simultaneously decide whether to approve the other’s choice. Both contribute what they choose in the first stage if both players approve; otherwise, both contribute the minimum of the two choices in the first stage. The MAM multiply implements the Pareto-efficient allocation in backward elimination of weakly dominated strategies (BEWDS), limit logit agent quantal response equilibrium, subgame perfect minimax regret equilibrium, level-k thinking, and diagonalization heuristics. Moreover, the MAM is unique under plausible conditions. Overall, contributions in the MAM experiment averaged 94.9%. Quantifying subjects’ responses to the questionnaire revealed the heterogeneity of reasoning processes to be consistent with the model.

Keywords: Public good experiment, Approval mechanism, Multiple implementation

JEL Classification: C72, C92, D74, H41, P43

Suggested Citation

Masuda, Takehito and Okano, Yoshitaka and Saijo, Tatsuyoshi, The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally (September 18, 2013). ISER Discussion Paper No. 874. Available at SSRN: https://ssrn.com/abstract=2266262

Takehito Masuda (Contact Author)

Osaka University - Institute of Social and Economic Research ( email )

6-1 Mihogaoka
Ibaraki, Osaka, 567-0047
Japan

HOME PAGE: http://https://sites.google.com/site/tmasudaexpecon/home

Yoshitaka Okano

Kochi University of Technology - Research Center for Social Design Engineering, School of Management ( email )

Tatsuyoshi Saijo

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
81-(0)6 6879-8571 (Phone)
81-(0)6 6878-2766 (Fax)

HOME PAGE: http://www.iser.osaka-u.ac.jp/~saijo/index-e.html

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