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Ranking alternatives by a fair bidding rule: a theoretical and experimental analysis

  • Werner Güth


    (Max Planck Institute of Economics, Strategic Interaction Group)

  • M. Vittoria Levati


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

  • Natalia Montinari

    (Max Planck Institute of Economics, Jena, Germany)

We introduce a procedurally fair rule to study a situation where people disagree about the value of three alternatives in the way captured by the voting paradox. The rule allows people to select a final collective ranking by submitting a bid vector with six components (the six possible rankings of the three alternatives). In a laboratory experiment we test the robustness of the rule to the introduction of subsidies and taxes. We have two main results. First, in all treatments, the most frequently chosen ranking is the socially efficient one. Second, subsidies slightly enhance overbidding. Furthermore, an analysis of individual bid vectors reveals interesting behavioral regularities.

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Paper provided by Friedrich-Schiller-University Jena in its series Jena Economic Research Papers with number 2012-005.

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Date of creation: 20 Feb 2012
Date of revision:
Handle: RePEc:jrp:jrpwrp:2012-005
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  1. Casella, Alessandra & Gelman, Andrew & Palfrey, Thomas R, 2003. "An Experimental Study of Storable Votes," CEPR Discussion Papers 4081, C.E.P.R. Discussion Papers.
  2. Werner Güth & Hartmut Kliemt, 2011. "Procedurally Fair Provision of Public Projects An axiomatic characterization," Jena Economic Research Papers 2011-016, Friedrich-Schiller-University Jena.
  3. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, June.
  4. Casella, Alessandra & Palfrey, Thomas R & Riezman, Raymond, 2005. "Minorities and Storable Votes," CEPR Discussion Papers 5278, C.E.P.R. Discussion Papers.
  5. 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.
  6. Kelly, Jerry S, 1974. "Voting Anomalies, the Number of Voters, and the Number of Alternatives," Econometrica, Econometric Society, vol. 42(2), pages 239-51, March.
  7. Casella, Alessandra, 2002. "Storable Votes," CEPR Discussion Papers 3508, C.E.P.R. Discussion Papers.
  8. Lehtinen, Aki, 2008. "The welfare consequences of strategic behaviour under approval and plurality voting," European Journal of Political Economy, Elsevier, vol. 24(3), pages 688-704, September.
  9. Kelly, Jerry S., 1974. "Necessity conditions in voting theory," Journal of Economic Theory, Elsevier, vol. 8(2), pages 149-160, June.
  10. Agnes Pinter & Robert F. Veszteg, 2008. "Minority vs. Majority: An Experimental Study of Standardized Bids," ISER Discussion Paper 0708, Institute of Social and Economic Research, Osaka University.
  11. repec:tpr:qjecon:v:93:y:1979:i:4:p:563-87 is not listed on IDEAS
  12. Simona Cicognani & Anna D’Ambrosio & Werner Güth & Simone Pfuderer & Matteo Ploner, 2015. "Community projects: an experimental analysis of a fair implementation process," Social Choice and Welfare, Springer, vol. 44(1), pages 109-132, January.
  13. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  14. Roger B. Myerson, 1977. "Incentive Compatability and the Bargaining Problem," Discussion Papers 284, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Werner Güth & Anastasios Koukoumelis & M. Vittoria Levati & Matteo Ploner, 2012. "Public projects benefiting some and harming others: three experimental studies," Jena Economic Research Papers 2012-034, Friedrich-Schiller-University Jena.
  16. 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.
  17. David P�rez-Castrillo & David Wettstein, 2002. "Choosing Wisely: A Multibidding Approach," American Economic Review, American Economic Association, vol. 92(5), pages 1577-1587, December.
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