Procedurally Fair Collective Provision: Its Requirements and Experimental Functionality

31 Pages Posted: 14 Jan 2014

See all articles by Werner Guth

Werner Guth

Max Planck Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Hartmut Kliemt

Frankfurt School of Finance & Management gemeinnützige GmbH

Anastasios Koukoumelis

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics

Maria Vittoria Levati

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; University of Verona - Department of Economics

Matteo Ploner

University of Trento

Date Written: December 30, 2013

Abstract

This paper derives and justifies a procedurally fair bidding mechanism and reviews experiments that apply the mechanism to public projects provision. In the experiments, not all parties benefit from provision, and the projects’ costs can be negative. The experimental results indicate that the mechanism is conducive to efficiency, despite the multiplicity of equilibria and underbidding incentives. The only condition is that the cost of the most efficient project must be positive.

Keywords: public project, bidding behavior, procedural fairness

JEL Classification: C720, C920, D630, H440

Suggested Citation

Güth, Werner and Kliemt, Hartmut and Koukoumelis, Anastasios and Levati, Maria Vittoria and Ploner, Matteo, Procedurally Fair Collective Provision: Its Requirements and Experimental Functionality (December 30, 2013). CESifo Working Paper Series No. 4541. Available at SSRN: https://ssrn.com/abstract=2378306

Werner Güth (Contact Author)

Max Planck Institute of Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Hartmut Kliemt

Frankfurt School of Finance & Management gemeinnützige GmbH ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

Anastasios Koukoumelis

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

Maria Vittoria Levati

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 19
37129 Verona
Italy

Matteo Ploner

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

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