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Efficiency and Voluntary Redistribution under Inequality

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  • Masaki Aoyagi
  • Naoko Nishimura
  • Yoshitaka Okano

Abstract

This paper presents an experimental analysis of two-by-two coordination games in which player 1 earns a substantially higher payoff than player 2 except in the inefficient equilibrium where they earn the same payoffs. The main focus is on the comparison of two treatments with and without the ex post redistribution stage in which both players may voluntarily transfer their payoffs earned in the game to the other player. We find that (1) the transfer opportunity raises the probability of coordination on an efficient equilibrium, (2) a transfer from player 1 to player 2 is positive, and is higher when player 2 chooses the action corresponding to the efficient equilibrium, and hence (3) the transfer opportunity tends to improve the efficiency and equity of the final outcome. Furthermore, these tendencies are stronger when the two players have conflicting interests over the two equilibria than when they have common interests.

Suggested Citation

  • Masaki Aoyagi & Naoko Nishimura & Yoshitaka Okano, 2017. "Efficiency and Voluntary Redistribution under Inequality," ISER Discussion Paper 0992, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0992
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2017/DP0992.pdf
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    References listed on IDEAS

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    Cited by:

    1. Lisa Bruttel & Werner Güth, 2018. "Asymmetric voluntary cooperation: a repeated sequential best-shot experiment," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(3), pages 873-891, September.

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