Endogenous Mechanisims

California Institute Of Technology, Pasadena CA

Investigators

Abstract

This research project focuses on the design of mechanisms or institutions for collective decision making. The first problem discussed in the proposal concerns the ability of candidates to affect the outcome of a voting procedure through their endogenous choices to enter or exit an election. The first question for study involves characterizing the voting procedures (mechanisms ) that are immune to such strategic entry/exit decisions by candidates. While there may exist some voting procedures that are immune to strategic candidacy, it appears that this class may be quite limited. So, it also makes sense to work towards understanding the impact that strategic candidacy has on various voting procedures that are not immune to strategic entry and exit decisions. An analysis of voting by successive elimination shows that accounting for entry/exit decisions can introduce some Pareto dominated outcomes. So a question that arises is whether this is true for other interesting voting procedures as well. This, and a series of related questions that are aimed at understanding the effects that endogenous candidacy decisions have on voting procedures, form the first part of the proposed research agenda. The second problem to be analyzed under the proposed research, also relates to understanding the impact of actions taken by agents before the operation of a mechanism. It is also motivated by a specific problem: that of producing a public good. In particular this part of the proposed research is focused on voluntary contributions mechanisms, and understanding how unilateral promises by some individual to match the contributions made by other individuals can affect the outcome. There are many situations where public goods receive significant funding through voluntary contributions. Examples include research into various diseases, disaster relief, charities, higher education, and environmental concerns, public television and radio. to name a few. A free rider analysis of voluntary contribution mechanisms tells us that in many situations these will be underfunded and inefficiently supplied. While a straight voluntary contribution mechanism would result in inefficiency, we often see endogenous additions to such mechanisms. For instance, many companies provide matching contribution plans, agreeing to supplement an employee's contributions to a variety of causes. The primary question to be analyzed in this part of the proposed research is whether such endogenous alterations of the voluntary contribution mechanism result in efficient outcomes. More specifically, under what conditions should we expect such matching plans to appear, and under what conditions will they result in efficient production of the public good?