Robust mechanism design and social preferences

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Robust Mechanism Design and Social Preferences AbstractWe study a classic mechanism design problem: How to organize trade between two privately informed parties. We characterize an optimal mechanism under selfish preferences and present experimental evidence that, under such a mechanism, a non-negligible fraction of individuals deviates from the intended behavior. We show that this can be explained by models of social preferences and introduce the notion of a social-preference-robust mechanism. We characterize an optimal mechanism in this class and present experimental evidence that it successfully controls behavior. We finally show that this mechanism is more profitable only if deviations from selfish behavior are sufficiently frequent.JEL-Code: C920, D030, D820.

Mechanism Design and Intentions

“…Applying formula (7) we obtainf * as given in Table 3. Bierbrauer et al (2014) for a formal definition of selfishness in the absence of externalities and for an investigation of the social preference models by Fehr and Schmidt (1999) and Falk and Fischbacher (2006). Similar observations, albeit not in mechanism design frameworks, have been made by Levine (1998), Fehr and Schmidt (1999), Bolton and Ockenfels (2000) or Segal and Sobel (2007).…”

“…Bartling and Netzer (2013) apply our results on strongly implementable social choice functions to an auction setting and test them experimentally. Bierbrauer et al (2014) combine the requirement of strong implementability with a robustness requirement on the agents' probabilistic beliefs (see Bergemann and Morris, 2005). Their main application is a bilateral trade problem, and they also provide an experimental test of the resulting mechanism.…”

Agreements with reciprocity: Co-financing and MOUs

“…We now incorporate reciprocity following D&K. 8 Their approach uses "kindness functions". To determine whether i is kind to j one needs a reference point, the equitable payoff.…”

Flip a Coin or Vote: An Experiment on Choosing Group Decision

“…Bierbrauer et al (2014) identify the theoretically optimal mechanism assuming social preferences of the players exist. Their experiment shows that choices for a small, but significant number of subjects, are better explained by including other-regarding preferences.…”