Doctoral Dissertation Research in Economics: An Experimental Comparison of Supermodular Lindahl Mechanisms

University Of Arizona, Tucson AZ

Investigators

Abstract

The free rider problem in public good economies has led to the theoretical development of incentive compatible institutions that yield efficient outcomes. Earlier experimental work on this class of institutions has almost exclusively focused on the stability properties of these institutions finding that institutions with strong stability properties were better at achieving their desired allocation. In this doctoral dissertation grant focuses on another important issue in economic design. Specifically, the project focuses on the role of informational complexity, hereafter complexity, in the design of economic institutions. An institution is more complex if it requires people to know more information when making their decisions. Some institutions become more complex as the economy grows in size. This study proposes to examine information complexity by comparing the performance of two stable efficient institutions that vary in the way their information requirement changes when the economy gets bigger. This is the first experimental study to: (a) focus on how an institution?s information requirement changes with the size of the economy; (b) to compare two supermodular Lindahl mechanisms; (c) to test the institution proposed by Van Essen (2008). It also provides further evidence on the scope of the applicability of incentive compatible mechanisms in the context of achieving socially desirable outcomes. Broader Impact: The study of how decisions are affected by the information requirements of institutional arrangements is important in many areas of economics and computer science. This study provides key insights into these properties by examining experimentally two different institutions whose allocation goal is the same, but they vary in the way their informational requirement changes for different sized economies.