Efficiency and Stability of Sampling Equilibrium in Public Goods Games

Journal of Public Economic Theory (2018)

21 Pages Posted: 7 Dec 2017 Last revised: 19 Dec 2018

See all articles by Cesar Mantilla

Cesar Mantilla

Universidad del Rosario; Institute for Advanced Study in Toulouse

Rajiv Sethi

Columbia University, Barnard College - Department of Economics; Santa Fe Institute

Juan-Camilo Cárdenas

Universidad de Los Andes

Date Written: December 19, 2018

Abstract

Most models of social preferences and bounded rationality that are effective in explaining efficiency-increasing departures from equilibrium behavior cannot easily account for similar deviations when they are efficiency-reducing. We show that the notion of sampling equilibrium, subject to a suitable stability refinement, can account for behavior in both efficiency-enhancing and efficiency-reducing conditions. In particular, in public goods games with dominant strategy equilibria, stable sampling equilibrium involves the play of dominated strategies with positive probability both when such behavior increases aggregate payoffs (relative to the standard prediction) and when it reduces aggregate payoffs. While the dominant strategy equilibrium prediction changes abruptly from zero contribution to full contribution as a parameter crosses a threshold, the stable sampling equilibrium remains fully mixed throughout. This is consistent with the available experimental evidence.

Keywords: bounded rationality, public goods; sampling equilibrium; sampling dynamics

JEL Classification: C73, D03, H41

Suggested Citation

Mantilla, Cesar and Sethi, Rajiv and Cárdenas, Juan-Camilo, Efficiency and Stability of Sampling Equilibrium in Public Goods Games (December 19, 2018). Journal of Public Economic Theory (2018), Available at SSRN: https://ssrn.com/abstract=3081506 or http://dx.doi.org/10.2139/ssrn.3081506

Cesar Mantilla (Contact Author)

Universidad del Rosario ( email )

Casa Pedro Fermín
Calle 14 # 4-69
Bogota, 110231
Colombia

HOME PAGE: http://www.urosario.edu.co/Profesores/Listado-de-profesores/M/Mantilla-Ribero-Cesar/

Institute for Advanced Study in Toulouse ( email )

31015 Toulouse, Cedex 6
France

Rajiv Sethi

Columbia University, Barnard College - Department of Economics ( email )

3009 Broadway
New York, NY 10027
United States
212-854-5140 (Phone)

HOME PAGE: http://www.columbia.edu/~rs328/

Santa Fe Institute

1399 Hyde Park Road
Santa Fe, NM 87501
United States

Juan-Camilo Cárdenas

Universidad de Los Andes ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia
339-4949 ext. 2473 (Phone)

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