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The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally

  • Takehito Masuda
  • Yoshitaka Okano
  • Tatsuyoshi Saijo

We propose the minimum approval mechanism (MAM) for a standard linear public good environment with two players. Players simultaneously and privately choose their contributions to the public good in the first stage. In the second stage, they simultaneously decide whether to approve the otherfs choice. Both contribute what they choose in the first stage if both players approve; otherwise, both contribute the minimum of the two choices in the first stage. The MAM multiply implements the Pareto-efficient allocation in backward elimination of weakly dominated strategies (BEWDS), limit logit agent quantal response equilibrium, subgame perfect minimax regret equilibrium, level-k thinking, and diagonalization heuristics. Moreover, the MAM is unique under plausible conditions. Overall, contributions in the MAM experiment averaged 94.9%. Quantifying subjectsf responses to the questionnaire revealed the heterogeneity of reasoning processes to be consistent with the model.

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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0874r.

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Date of creation: May 2013
Date of revision: Sep 2013
Handle: RePEc:dpr:wpaper:0874r
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