Overcoming Incentive Constraints? The (In-)Effectiveness of Social Interaction

37 Pages Posted: 25 Oct 2006

See all articles by Dirk Engelmann

Dirk Engelmann

University of London - Royal Holloway - Department of Economics

Veronika Grimm

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - School of Business & Economics

Date Written: October 18, 2006

Abstract

We experimentally study behavior in a simple voting game where players have private information about their preferences. With random matching, subjects overwhelmingly follow the dominant strategy to exaggerate their preferences, which leads to inefficiency. Applying a linking mechanism suggested by Jackson and Sonnenschein (2005) captures nearly all achievable efficiency gains. In the absence of that mechanism, repeated interaction leads to significant gains in truthful representation and efficiency only if players can choose their partners.

Keywords: Experimental Economics, Mechanism Design, Implementation, Linking, Bayesian Equilibrium, Efficiency

JEL Classification: A13, C72, C91, C92, D64, D72, D80

Suggested Citation

Engelmann, Dirk and Grimm, Veronika, Overcoming Incentive Constraints? The (In-)Effectiveness of Social Interaction (October 18, 2006). Available at SSRN: https://ssrn.com/abstract=940073 or http://dx.doi.org/10.2139/ssrn.940073

Dirk Engelmann (Contact Author)

University of London - Royal Holloway - Department of Economics ( email )

Egham, TW20 0EX
United Kingdom

Veronika Grimm

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - School of Business & Economics ( email )

Nuremburg
Germany

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