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The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally

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  • Takehito Masuda
  • Yoshitaka Okano
  • Tatsuyoshi Saijo

Abstract

We propose the minimum approval mechanism (MAM) for a standard linear public good environment with two players. Players simultaneously and privately choose their contributions to the public good in the first stage. In the second stage, they simultaneously decide whether to approve the other's choice. Both contribute what they choose in the first stage if both players approve; otherwise, both contribute the minimum of the two choices in the first stage. The MAM implements the Pareto-efficient allocation in backward elimination of weakly dominated strategies (BEWDS) and is unique under plausible conditions. Contributions in the MAM experiment overall averaged 94.9%. The data support BEWDS rather than subgame perfect Nash equilibria. Quantifying subjects' responses to the questionnaire showed that the majority of subjects in the MAM found a heuristic or an algorithm named diagonalization and supported the notions of minimax regret and iterated best response, all of which mimic BEWDS outcomes.

Suggested Citation

  • Takehito Masuda & Yoshitaka Okano & Tatsuyoshi Saijo, 2013. "The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally," ISER Discussion Paper 0874, Institute of Social and Economic Research, The University of Osaka.
    • Handle: RePEc:dpr:wpaper:0874
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    Cited by:

    1. Yao, Koffi Serge William & Lavaine, Emmanuelle & Willinger, Marc, 2024. "Effectiveness of the approval mechanism in a three-player common pool resource dilemma," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).
    2. Masuda, Takehito & Okano, Yoshitaka & Saijo, Tatsuyoshi, 2014. "The minimum approval mechanism implements the efficient public good allocation theoretically and experimentally," Games and Economic Behavior, Elsevier, vol. 83(C), pages 73-85.
    3. Koffi Serge William Yao & Emmanuelle Lavaine & Marc Willinger, 2021. "Effectiveness of the approval mechanism for CPR dilemmas: unanimity versus majority rule," CEE-M Working Papers hal-03234786, CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro.
    4. Takehito Masuda & Yoshitaka Okano & Tatsuyoshi Saijo, 2013. "The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally," ISER Discussion Paper 0874r, Institute of Social and Economic Research, The University of Osaka, revised Sep 2013.

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