Exogenous Targeting Instruments under Differing Information Conditions
AbstractThis paper tests the ability of an exogenous targeting instrument to induce compliance when the principal cannot observe the actions of individual agents. A number of papers show that although these instruments are able to induce groups to the target outcome, they are not able to induce individuals to make socially optimal decisions in a number of different controlled laboratory experiments. This study investigates whether the information individuals have about others’ payoffs affects how they make their decisions in this environment. Ledyard (1995) suggests that when subjects have less information in public goods experiments they are more likely to choose the Nash equilibrium decision. However, as he points out, this effect differs between groups with homogeneous and heterogeneous payoff functions. The results show that reducing information reduces efficiency although there are no significant effects on the absolute level of group decisions at the aggregate level. At the individual level, reducing the information players have complicates the environment resulting in subjects choosing either lower decision numbers or more randomly. Moreover, these effects seem to be more serious for subjects whose Nash decisions are on the boundary of the decision space.
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Bibliographic InfoPaper provided by University of Massachusetts Amherst, Department of Resource Economics in its series Working Papers with number 2007-10.
Length: 40 pages
Date of creation: Oct 2007
Date of revision:
Moral Hazard in Groups; Exogenous Targeting Instruments; Experiments; Information;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-24 (All new papers)
- NEP-EXP-2007-09-24 (Experimental Economics)
- NEP-GTH-2007-09-24 (Game Theory)
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