Equality Concerns and the Limits of Self-Governance in Heterogeneous Populations

40 Pages Posted: 12 Oct 2015

See all articles by Lata Gangadharan

Lata Gangadharan

University of Melbourne - Department of Economics

Nikos Nikiforakis

New York University (NYU) - New York University Abu Dhabi

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Global Labor Organization (GLO)

Abstract

Mechanisms to overcome social dilemmas provide incentives to maximize efficiency. However, often – such as when agents are heterogeneous – there is a trade-off between efficiency and equality. Agents' concerns for equality in such instances can limit the ability of mechanisms to promote efficiency. We provide evidence for this from a public good experiment using a simple mechanism which allows individuals to communicate periodically with other group members and reward them for their actions. We show that, in homogeneous populations – where there is no tension between efficiency and equality – the mechanism permits group to obtain maximum efficiency. This is not the case in heterogeneous populations where individuals derive different benefits from cooperation. Although almost all heterogeneous groups agree to follow specific contribution rules with positive contributions, most of them either prioritize equality over efficiency or strike a compromise between the two. These findings suggest that equality concerns can impose limits on the ability of heterogeneous populations to reach efficient outcomes through self-governance.

Keywords: communication, rewards, cooperation, normative conflict, heterogeneity

JEL Classification: C92, H41, D74

Suggested Citation

Gangadharan, Lata and Nikiforakis, Nikos and Villeval, Marie Claire, Equality Concerns and the Limits of Self-Governance in Heterogeneous Populations. IZA Discussion Paper No. 9384, Available at SSRN: https://ssrn.com/abstract=2672170

Lata Gangadharan (Contact Author)

University of Melbourne - Department of Economics ( email )

Victoria, 3010
Australia
+61 3 9344 5408 (Phone)
61 3 8344 6899 (Fax)

Nikos Nikiforakis

New York University (NYU) - New York University Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

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

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS ( email )

93, chemin des Mouilles
Ecully, 69130
France
+33 472 86 60 79 (Phone)
+33 472 86 60 90 (Fax)

HOME PAGE: http://www.gate.cnrs.fr/equipe/perso/villeval/villeval.html

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Global Labor Organization (GLO) ( email )

Collogne
Germany

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