One man, one bid

Goeree, JK; Zhang, J

One man, one bid

Goeree, JK

Zhang, J

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Publication Type:: Journal Article
Citation:: Games and Economic Behavior, 2017, 101 pp. 151 - 171
Issue Date:: 2017-01-01

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Field	Value	Language
dc.contributor.author	Goeree, JK https://orcid.org/0000-0001-9876-3425	en_US
dc.contributor.author	Zhang, J https://orcid.org/0000-0003-3274-5245	en_US
dc.date.available	2020-05-25T19:20:04Z
dc.date.issued	2017-01-01	en_US
dc.identifier.citation	Games and Economic Behavior, 2017, 101 pp. 151 - 171	en_US
dc.identifier.issn	0899-8256	en_US
dc.identifier.uri	http://hdl.handle.net/10453/67964
dc.description.abstract	© 2016 Elsevier Inc. We compare two mechanisms to implement a simple binary choice, e.g. adopt one of two proposals. We show that when neither alternative is ex ante preferred, simple majority voting cannot implement the first best outcome. We introduce a simple bidding mechanism where votes can be bought at a quadratic cost and voters receive rebates equal to the average of others' payments. This mechanism is budget-balanced, individually rational, and fully efficient in the limit. Moreover, the mechanism redistributes from those that gain from the outcome to those that lose and everyone is better off under bidding compared to voting. We test the two mechanisms in the lab using an environment with “moderate” and “extremist” voters. The observed efficiency losses under voting are close to theoretical predictions and significantly larger than under bidding. Because of redistribution, the efficiency gain from bidding benefits mostly the moderate voters.	en_US
dc.relation	http://purl.org/au-research/grants/arc/DP150104491
dc.relation.ispartof	Games and Economic Behavior	en_US
dc.relation.isbasedon	10.1016/j.geb.2016.10.003	en_US
dc.subject.classification	Economic Theory	en_US
dc.title	One man, one bid	en_US
dc.type	Journal Article
utslib.citation.volume	101	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	1402 Applied Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	open_access
pubs.publication-status	Published	en_US
pubs.volume	101	en_US

Abstract:

© 2016 Elsevier Inc. We compare two mechanisms to implement a simple binary choice, e.g. adopt one of two proposals. We show that when neither alternative is ex ante preferred, simple majority voting cannot implement the first best outcome. We introduce a simple bidding mechanism where votes can be bought at a quadratic cost and voters receive rebates equal to the average of others' payments. This mechanism is budget-balanced, individually rational, and fully efficient in the limit. Moreover, the mechanism redistributes from those that gain from the outcome to those that lose and everyone is better off under bidding compared to voting. We test the two mechanisms in the lab using an environment with “moderate” and “extremist” voters. The observed efficiency losses under voting are close to theoretical predictions and significantly larger than under bidding. Because of redistribution, the efficiency gain from bidding benefits mostly the moderate voters.

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http://hdl.handle.net/10453/67964