Experimental Social Planners: Good Natured, But Overly Optimistic

48 Pages Posted: 21 Nov 2017 Last revised: 16 Dec 2017

See all articles by Christoph Engel

Christoph Engel

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Bonn - Faculty of Law & Economics; Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students; Universität Osnabrück - Faculty of Law

Svenja Hippel

Max Planck Institute for Research on Collective Goods

Date Written: November 1, 2017

Abstract

Public goods are dealt with in two literatures that neglect each other. Mechanism design advises a social planner that expects individuals to misrepresent their valuations. Experiments study the provision of the good when preferences might be non-standard. We introduce the problem of the mechanism design literature into a public good experiment. Valuations for the good are heterogeneous. To each group we add a participant with power to impose a contribution scheme. We study four settings: the authority has no personal interest and (1) valuations are common knowledge or (2) active participants may misrepresent their types; the authority has a personal interest (3) and must decide before learning her own valuation or (4) knows her own valuation. Disinterested social planners predominantly choose a payment rule that gives every group member the same final payoff, even if misrepresentation is possible. Authorities are overly optimistic about truth telling. Interested social planners abuse their power, except if the opportunity cost of a more balanced rule is small.

Keywords: Public Good, Social Planner, Truthtelling, Experiment

JEL Classification: C91, D02, D03, D61, D62, D64, H23, K12

Suggested Citation

Engel, Christoph and Hippel, Svenja, Experimental Social Planners: Good Natured, But Overly Optimistic (November 1, 2017). MPI Collective Goods Preprint, No. 2017/23, Available at SSRN: https://ssrn.com/abstract=3074350 or http://dx.doi.org/10.2139/ssrn.3074350

Christoph Engel (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

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University of Bonn - Faculty of Law & Economics

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Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students ( email )

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Universität Osnabrück - Faculty of Law

Osnabruck, D-49069
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Svenja Hippel

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
Bonn, 53113
Germany

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