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Second thoughts of social dilemma in mechanism design

Author

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  • Tatsuyoshi Saijo

    (School of Economics and Management, Kochi University of Technology)

Abstract

This paper shows that second thoughts are not an innocent device in our daily life, but is human wisdom that plays an important role in resolving problems such as social dilemmas. We design a simple mechanism to achieve Pareto efficiency in social dilemmas, and then compare the performance of this mechanism with and without second thoughts. First, second thoughts change the payoff structure of the game in favor of cooperation. Second, this mechanism is robust even when players deviate from a payoff maximizing behavior.

Suggested Citation

  • Tatsuyoshi Saijo, 2019. "Second thoughts of social dilemma in mechanism design," Working Papers SDES-2019-6, Kochi University of Technology, School of Economics and Management, revised Jun 2019.
    • Handle: RePEc:kch:wpaper:sdes-2019-6
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    File URL: http://www.souken.kochi-tech.ac.jp/seido/wp/SDES-2019-6.pdf
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    References listed on IDEAS

    as
    1. Saijo, Tatsuyoshi & Shen, Junyi, 2018. "Mate choice mechanism for solving a quasi-dilemma," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 72(C), pages 1-8.
    2. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 23-38.
    3. 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.
    4. Hurwicz, Leonid & Schmeidler, David, 1978. "Construction of Outcome Functions Guaranteeing Existence and Pareto Optimality of Nash Equilibria," Econometrica, Econometric Society, vol. 46(6), pages 1447-1474, November.
    5. L. Hurwicz, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(2), pages 217-225.
    6. Kalai, Ehud, 1981. "Preplay negotiations and the prisoner's dilemma," Mathematical Social Sciences, Elsevier, vol. 1(4), pages 375-379, August.
    7. Varian, Hal R, 1994. "A Solution to the Problem of Externalities When Agents Are Well-Informed," American Economic Review, American Economic Association, vol. 84(5), pages 1278-1293, December.
    8. Tatsuyoshi Saijo & Takehito Masuda & Takafumi Yamakawa, 2018. "Approval mechanism to solve prisoner’s dilemma: comparison with Varian’s compensation mechanism," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 51(1), pages 65-77, June.
    9. Xiaochuan Huang & Takehito Masuda & Yoshitaka Okano & Tatsuyoshi Saijo, 2014. "Cooperation among behaviorally heterogeneous players in social dilemma with stay or leave decisions," Working Papers SDES-2014-7, Kochi University of Technology, School of Economics and Management, revised Feb 2015.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    second thoughts; subgame perfection; social dilemma; cooperation; mechanism design;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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