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Procedurally fair collective provision: its requirements and experimental functionality

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  • Werner Güth

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

  • Hartmut Kliemt

    (Frankfurt School of Finance & Management)

  • Anastasios Koukoumelis

    (Max Planck Institute of Economics, Jena)

  • M. Vittoria Levati

    (Max Planck Institute of Economics, Jena and Department of Economics, University of Verona)

  • Matteo Ploner

    (DECO-CEEL, University of Trento)

Abstract

This paper derives and justifies a procedurally fair bidding mechanism and reviews experiments that apply the mechanism to public projects pro- vision. In the experiments, not all parties benefit from provision, and the projects' costs can be negative. The experimental results indicate that the mechanism is conducive to efficiency, despite the multiplicity of equilibria and underbidding incentives. The only condition is that the cost of the most efficient project must be positive.

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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 2013-034.

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Date of creation: 10 Sep 2013
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Handle: RePEc:jrp:jrpwrp:2013-034

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Keywords: Public project; Bidding behavior; Procedural fairness;

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  1. Werner Güth & Anastasios Koukoumelis & M. Vittoria Levati & Matteo Ploner, 2013. "Providing negative cost public projects under a fair mechanism: An experimental analysis," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2013-021, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Buchanan, James M, 1975. "A Contractarian Paradigm for Applying Economic Theory," American Economic Review, American Economic Association, American Economic Association, vol. 65(2), pages 225-30, May.
  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, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2012-005, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Hume, David, 1740. "A Treatise of Human Nature (III) Of Morals," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, volume 3, number hume1740.
  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, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2011-034, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  6. Hume, David, 1739. "A Treatise of Human Nature (II) Of the Passions," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, volume 2, number hume1739a.
  7. Hume, David, 1739. "A Treatise of Human Nature (I) Of the Understanding," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, volume 1, number hume1739.
  8. Douglass C. North, 1988. "Ideology and Political/Economic Institutions," Cato Journal, Cato Journal, Cato Institute, Cato Journal, Cato Institute, vol. 8(1), pages 15-28, Spring/Su.
  9. Smith, Vernon L, 1977. "The Principle of Unanimity and Voluntary Consent in Social Choice," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(6), pages 1125-39, December.
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