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Resource Allocation with Karma Mechanisms—A Review

Author

Listed:
  • Kevin Riehl

    (Traffic Engineering Group, Institute for Transport Planning and Systems, ETH Zurich, Stefano-Franscini-Platz 5, 8093 Zurich, Switzerland)

  • Anastasios Kouvelas

    (Traffic Engineering Group, Institute for Transport Planning and Systems, ETH Zurich, Stefano-Franscini-Platz 5, 8093 Zurich, Switzerland)

  • Michail A. Makridis

    (Traffic Engineering Group, Institute for Transport Planning and Systems, ETH Zurich, Stefano-Franscini-Platz 5, 8093 Zurich, Switzerland)

Abstract

Monetary markets serve as established resource allocation mechanisms, typically achieving efficient solutions with limited information. However, they are susceptible to market failures, particularly under the presence of public goods, externalities, or inequality of economic power. Moreover, in many resource-allocating contexts, money faces social, ethical, and legal constraints. Consequently, artificial currencies and non-monetary markets are increasingly explored, with Karma emerging as a notable concept. Karma, a non-tradeable, resource-inherent currency for prosumer resources, operates on the principles of contribution and consumption of specific resources. It embodies fairness, near incentive compatibility, Pareto-efficiency, robustness to population heterogeneity, and can incentivize a reduction in resource scarcity. The literature on Karma is scattered across disciplines, varies in scope, and lacks conceptual clarity and coherence. Thus, this study undertakes a comprehensive review of the Karma mechanism, systematically comparing its resource allocation applications and elucidating overlooked mechanism design elements. Through a systematic mapping study, this review situates Karma within its literature context, offers a structured design parameter framework, and develops a road map for future research directions.

Suggested Citation

  • Kevin Riehl & Anastasios Kouvelas & Michail A. Makridis, 2024. "Resource Allocation with Karma Mechanisms—A Review," Economies, MDPI, vol. 12(8), pages 1-27, August.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:8:p:211-:d:1460287
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    References listed on IDEAS

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    1. Eric Budish, 2011. "The Combinatorial Assignment Problem: Approximate Competitive Equilibrium from Equal Incomes," Journal of Political Economy, University of Chicago Press, vol. 119(6), pages 1061-1103.
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