Schott et al. (2007) have shown that the “tragedy of the commons” can be overcome when individuals share their output equally in groups of optimal size and there is no communication. In this paper we investigate the impact of introducing communication groups that may or may not be linked to output sharing groups. Communication reduces shirking, increases aggregate effort and reduces aggregate rents, but only when communication groups and output-sharing groups are linked. The effect is stronger for fixed groups (partners treatment) than for randomly reassigned groups (strangers treatment). Performance is not distinguishable from the no-communication treatments when communication is permitted but subjects share output within groups different from the groups within which they communicate. Communication also tends to enhance the negative effect of the partnered group assignment on the equality of individual payoffs. We use detailed content analysis to evaluate the impact of communication messages on behavior across treatments.
Lacking payment systems become a bottleneck for the vision of the Information Economy. In many cases payments of fractions of a cent, so-called micropayments, are of particular interest. In this paper we propose a framework to evaluate payment systems. The framework consists of a well structured parameter vector of desired attributes. For the evaluation of attribute values we suggest to use VTS diagrams from object oriented analysis and design. The framework is applied to DigiCash, SET and First Virtual.
Many controlled laboratory experiments have shown non-binding communication among appropriators from a common pool to be an effective way to reduce over-appropriation from the commons. The controlled laboratory environments have tended to be environments with fewer than 10 participants. Recent work by Buckley et al. (2017) found that non-binding communication is not successful in reducing appropriation effort in a controlled laboratory environment with 12 participants. A conjecture was that there might be a difference between 12 participants and 8 participants (the typical number used by Ostrom et al. 1994 in their seminal work and used in many subsequent studies by others). This paper presents an environment that utilizes the CPR setting identical to that used by Buckley et al. (2017) reduces the number of appropriators from 12 to 8. Eight sessions (4 with and 4 without non-binding communication) are run using the Buckley et al. (2017) environment with 8 participants. The results suggest that the number of participants may not be an important factor in driving the differences between the impact that non-binding communication has on the Buckley et al. (2017) and Ostrom et al. (1994) environments. Alternate conjectures are presented to account for the differences.
Using a network approach we provide a characterization of a separating equilibrium for standard signaling games where the senders payoff function is quasi-linear. Given a strategy of the sender, we construct a network where the node set and the length between two nodes are the set of the senders type and the difference of signaling costs, respectively. Construction of a separating equilibrium is then equivalent to constructing the length between two nodes in the network under the condition that the response of the receiver is a node potential.We show that, when the set of the senders type is finite, the collection of separating signaling functions forms a lower bounded lattice. We describe an algorithm to compute separating equilibrium strategies. When the set of the senders type is a real interval, shortest path lengths are antisymmetric and a node potential is unique up to a constant. A strategy of the sender in a separating equilibrium is characterized by some differential equation with a unique solution.Our results can be readily applied to a broad range of economic situations, such as the standard job market signaling model of Spence a model not captured by earlier papers and principal-agent models with production.
Two approaches to emissions trading are cap-and-trade, in which an aggregate cap on emissions is distributed in the form of allowance permits, and baseline-and-credit, in which firms earn emission reduction credits for emissions below their baselines. Theoretical considerations suggest the long-run equilibria of the two plans will differ if baselines are proportional to output, because a variable baseline is equivalent to an output subsidy. This paper reports on a laboratory experiment designed to test the prediction in a laboratory environ- ment in which sub jects representing firms choose emission technologies and output capacities. A computerized environment has been created in which sub jects participate in markets for emission rights and for output. Demand for output is simulated. All decisions are tracked through a double-entry bookkeeping system. Our evidence supports the theoretical prediction that aggregate output and emissions are in- efficiently high under a baseline-and-credit trading plan compared to a corresponding cap-and-trade plan.
Introduction. In distributed systems, where problem solutions have to be jointly derived by several selfish agents and where problem data is spread over the agents as private information, mechanism design is used to motivate agents to reveal their private information truthfully and to obtain a good overall solution for the system. As a simple example, consider single item auctions, where several bidders are asked to reveal their valuation for a certain good. Dependent on the bids, the mechanism allocates the good to one of the bidders and the price of the good is designed such that agents have an incentive to bid their true valuation. We consider direct revelation mechanisms, which consist of an allocation rule that selects an allocation depending on the agents’ reports about their private information, and a payment scheme that assigns a payment to every agent. Allocation rules that give rise to a mechanism in which truth-telling is a dominant strategy for every agent are called truthfully implementable. Our concern is with the payment scheme that extends a truthfully implementable allocation rule to a truthful mechanism. The property of an allocation rule to have a unique payment scheme completing the allocation rule to a truthful mechanism is called revenue equivalence. We give a characterization for an allocation rule to satisfy revenue equivalence. In order to obtain this characterization, we prove a property on complete directed graphs and apply it to the so called allocation graph, which is defined by the allocation rule and the valuation function of an agent. The characterization holds for any (possibly infinite) outcome space. Furthermore, we give elementary and simple proofs for the uniqueness of the payment scheme in a truthful mechanism for the cases of finite and countably infinite outcome spaces under very weak assumptions. Many of the known results follow as immediate consequences of ours, e.g. results in Green and Laffont [2], Holmstrom [4], Krishna and Maenner [5], Milgrom and Segal [6], Suijs [10] and Chung and Olszewski [1]. For details and discussions, especially of the paper by Chung and Olszewski, we refer to the full version of
In their frequently cited book Eastman and Stykolt (1967) advanced two major propositions concerning the effect of small market sizes on Canadian industry. Specifically they predicted that in tariff protected markets in which domestic consumption is small relative to the minimum efficient scale of plant one would discover both an abnormally high fraction of output produced in plants of suboptimal scale and an abnormally high percentage of foreign ownership. These hypotheses have become deeply ingrained in the discussion of Canadian industrial economics.1 In most cases they are accepted as a basis for policy discussion without further investigation. This paper assesses the theoretical and empirical support for the first EastmanSykolt proposition, that small market size induces suboptimal capacity. On the basis of an extensive literature search2 it concludes that there is considerable empirical support for some aspects of the theory but that the theory itself has not been satisfactorily formulated.
Platforms create value by matching participants on alternate sides of the marketplace. Although many platforms practice one-to-one matching (e.g., Uber), others can conduct and monetize one-to-many simultaneous matches (e.g., lead-marketing platforms). Both formats involve one dimension of private information, a participant’s valuation for exclusive or shared allocation, respectively. This paper studies the problem of designing an auction format for platforms that mix the modes rather than limit to one and, therefore, involve both dimensions of information. We focus on incentive-compatible auctions (i.e., where truthful bidding is optimal) because of ease of participation and implementation. We formulate the problem to find the revenue-maximizing incentive-compatible auction as a mathematical program. Although hard to solve, the mathematical program leads to heuristic auction designs that are simple to implement, provide good revenue, and have speedy performance, all critical in practice. It also enables creation of upper bounds on the (unknown) optimal auction revenue, which are useful benchmarks for our proposed auction designs. By demonstrating a tight gap for our proposed two-dimensional reserve-price-based mechanism, we prove that it has excellent revenue performance and places low information and computational burden on the platform and participants. This paper was accepted by Chris Forman, information systems.
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