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Providing revenue-generating projects under a fair mechanism: An experimental analysis

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Listed:
  • Güth, Werner
  • Koukoumelis, Anastasios
  • Levati, M. Vittoria
  • Ploner, Matteo

Abstract

This paper considers a procedurally fair provision mechanism that allows members of a small group to determine, through their bids, which project to implement. Previous experiments with (only) costly projects have demonstrated that the mechanism is efficiency enhancing. Our experiment tests whether the mechanism remains conducive to efficiency when revenue-generating, but less efficient, projects are made available. We find that this is not the case. Additionally, we detect no significant difference in bid levels depending on whether mixed valuations are present or absent, and on whether the others’ valuations are known or unknown. We interpret these results as evidence that the availability of revenue-generating projects engenders a biased perception of the efficient costly project.

Suggested Citation

  • Güth, Werner & Koukoumelis, Anastasios & Levati, M. Vittoria & Ploner, Matteo, 2014. "Providing revenue-generating projects under a fair mechanism: An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 410-419.
    • Handle: RePEc:eee:jeborg:v:108:y:2014:i:c:p:410-419
    DOI: 10.1016/j.jebo.2014.02.024
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    References listed on IDEAS

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    Cited by:

    1. Dekel, Sagi & Fischer, Sven & Zultan, Ro’i, 2017. "Potential Pareto Public Goods," Journal of Public Economics, Elsevier, vol. 146(C), pages 87-96.
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    3. Federica Alberti & Werner Güth & Kei Tsutsui, 2020. "Experimental effects of institutionalizing co-determination by a procedurally fair bidding rule," Working Papers in Economics & Finance 2020-10, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.

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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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