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Equality concerns and the limits of self-governance in heterogeneous populations

Listed author(s):
  • Lata Gangadharan

    ()

    (Department of Economics, Monash University, Clayton, Australia)

  • Nikos Nikiforakis

    ()

    (Social Science Division, New York University Abu Dhabi, P.O. Box 129188, Abu Dhabi, United Arab Emirates)

  • Marie Claire Villeval

    ()

    (Université de Lyon, F-69007, France; CNRS, GATE Lyon St Etienne, 93, Chemin des Mouilles, F-69130, Ecully, France)

Mechanisms to overcome social dilemmas provide incentives to maximize efficiency. However, often – such as when agents are heterogeneous – there is a trade-off between efficiency and equality. Agents’ concerns for equality in such instances can limit the ability of mechanisms to promote efficiency. We provide evidence for this from a public good experiment using a simple mechanism which allows individuals to communicate periodically with other group members and reward them for their actions. We show that, in homogeneous populations – where there is no tension between efficiency and equality – the mechanism permits group to obtain maximum efficiency. This is not the case in heterogeneous populations where individuals derive different benefits from cooperation. Although almost all heterogeneous groups agree to follow specific contribution rules with positive contributions, most of them either prioritize equality over efficiency or strike a compromise between the two. These findings suggest that equality concerns can impose limits on the ability of heterogeneous populations to reach efficient outcomes through self-governance.

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Paper provided by Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon in its series Working Papers with number 1525.

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Date of creation: 2015
Handle: RePEc:gat:wpaper:1525
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