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Endogenous Community Formation and Collective Provision - A Procedurally Fair Mechanism

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  • Werner Güth

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    (Max Planck Institute of Economics, Strategic Interaction Group)

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    Abstract

    A group of actors, individuals or firms, can engage in collectively providing projects which may be costly or generating revenues and which may benefit some and harm others. Based on requirements of procedural fairness (Güth and Kliemt, 2013), we derive a bidding mechanism determining endogenously who participates in collective provision, which projects are implemented, and the positive or negative payments due to the participating members. We justify and discuss this procedural fairness approach and compare it with that of optimal, e.g. welfaristic game theoretic mechanism design (e.g. Myerson, 1979).

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    File URL: http://pubdb.wiwi.uni-jena.de/pdf/wp_2013_013.pdf
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    Bibliographic Info

    Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2013-013.

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    Date of creation: 21 Mar 2013
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    Handle: RePEc:jrp:jrpwrp:2013-013

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    Keywords: Procedural fairness; Mechanism design; Equality axiom; Public provision; Collective action;

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    1. Nadine Chlaß & Werner Güth & Topi Miettinen, 2009. "Beyond Procedural Equity and Reciprocity," Jena Economic Research Papers 2009-069, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
    2. Simona Cicognani & Aanna D'Ambrosio & Werner Güth & Simone Pfuderer & Matteo Ploner, 2012. "Community Projects: An Experimental Analysis of a Fair Implementation Process," Jena Economic Research Papers 2012-015, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
    3. Werner Güth & M. Vittoria Levati & Natalia Montinari, 2012. "Ranking alternatives by a fair bidding rule: a theoretical and experimental analysis," Jena Economic Research Papers 2012-005, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
    4. Werner Güth & Anastasios Koukoumelis & M. Vittoria Levati & Matteo Ploner, 2012. "Public projects benefiting some and harming others: three experimental studies," Jena Economic Research Papers 2012-034, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
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