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Providing negative cost public projects under a fair mechanism: An experimental analysis

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Author Info

  • Werner Güth

    ()
    (Max Planck Institute of Economics, Strategic Interaction Group)

  • Anastasios Koukoumelis

    (Max Planck Institute of Economics, Strategic Interaction Group)

  • M. Vittoria Levati

    (Max Planck Institute of Economics, Strategic Interaction Group, and Department of Economics, University of Verona)

  • Matteo Ploner

    (DECO-CEEL, University of Trento)

Abstract

This paper experimentally examines a procedurally fair provision mech- anism allowing members of a small community to determine, via their bids, which of four alternative public projects to implement. Previous experi- ments with positive cost projects have demonstrated that the mechanism is efficiency enhancing. Our experiment tests whether the mechanism re- mains conducive to efficiency when negative cost, but less efficient, projects are made available. We find that this is not the case. On the other hand, we detect no significant difference in bid levels depending on whether mixed feelings are present or absent, and on whether the others' valuations are known or unknown.

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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 2013-021.

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Date of creation: 13 May 2013
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Handle: RePEc:jrp:jrpwrp:2013-021

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Keywords: Public projects; Bidding behavior; Procedural fairness; Experiment;

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References

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  1. Sarah Jacobson & Jason Delaney, 2012. "The Good of the Few: Reciprocity and the Provision of a Public Bad," Department of Economics Working Papers 2014-03, Department of Economics, Williams College, revised May 2014.
  2. Guth, Werner, 1986. "Auctions, public tenders, and fair division games: An axiomatic approach," Mathematical Social Sciences, Elsevier, vol. 11(3), pages 283-294, June.
  3. Smith, Vernon L, 1977. "The Principle of Unanimity and Voluntary Consent in Social Choice," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1125-39, December.
  4. 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.
  5. Werner Güth & Anastasios Koukoumelis & M. Vittoria Levati, 2011. ""One man's meat is another man's poison." An experimental study of voluntarily providing public projects that raise mixed feelings," Jena Economic Research Papers 2011-034, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
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Cited by:
  1. Werner Güth & Hartmut Kliemt & Anastasios Koukoumelis & M. Vittoria Levati & Matteo Ploner, 2013. "Procedurally Fair Collective Provision: Its Requirements and Experimental Functionality," CESifo Working Paper Series 4541, CESifo Group Munich.

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