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Providing negative cost public projects under a fair mechanism: An experimental analysis

Author

Listed:
  • Werner Güth

    (Max Planck Institute of Economics, Strategic Interaction Group)

  • Anastasios Koukoumelis

    (Max Planck Institute of Economics, Strategic Interaction Group)

  • M. Vittoria Levati

    (Max Planck Institute of Economics, Strategic Interaction Group, and Department of Economics, University of Verona)

  • Matteo Ploner

    (DECO-CEEL, University of Trento)

Abstract

This paper experimentally examines a procedurally fair provision mech- anism allowing members of a small community to determine, via their bids, which of four alternative public projects to implement. Previous experi- ments with positive cost projects have demonstrated that the mechanism is efficiency enhancing. Our experiment tests whether the mechanism re- mains conducive to efficiency when negative cost, but less efficient, projects are made available. We find that this is not the case. On the other hand, we detect no significant difference in bid levels depending on whether mixed feelings are present or absent, and on whether the others' valuations are known or unknown.

Suggested Citation

  • 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 2013-021, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2013-021
    as

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    File URL: http://www2.wiwi.uni-jena.de/Papers/jerp2013/wp_2013_021.pdf
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    References listed on IDEAS

    as
    1. Sarah Jacobson & Jason Delaney, 2012. "The Good of the Few: Reciprocity in the Provision of a Public Bad," Department of Economics Working Papers 2012-02, Department of Economics, Williams College.
    2. Guth, Werner, 1986. "Auctions, public tenders, and fair division games: An axiomatic approach," Mathematical Social Sciences, Elsevier, vol. 11(3), pages 283-294, June.
    3. Güth, Werner & Vittoria Levati, M. & Montinari, Natalia, 2014. "Ranking alternatives by a fair bidding rule: A theoretical and experimental analysis," European Journal of Political Economy, Elsevier, vol. 34(C), pages 206-221.
    4. 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 1125-1139, December.
    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 2011-034, Friedrich-Schiller-University Jena.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Werner Güth & Hartmut Kliemt & Anastasios Koukoumelis & M. Vittoria Levati & Matteo Ploner, 2013. "Procedurally Fair Collective Provision: Its Requirements and Experimental Functionality," CESifo Working Paper Series 4541, CESifo.
    2. Werner Güth & Hartmut Kliemt & Anastasios Koukoumelis & M. Vittoria Levati & Matteo Ploner, 2013. "Procedurally Fair Collective Provision: Its Requirements and Experimental Functionality," CESifo Working Paper Series 4541, CESifo.

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    More about this item

    Keywords

    Public projects; Bidding behavior; Procedural fairness; Experiment;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets

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