The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally
33 Pages Posted: 18 May 2013 Last revised: 18 Sep 2013
Date Written: September 18, 2013
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: Suggested Citation