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How do people design a mechanism? Experimental evidence

Sibly, H ORCID: 0000-0003-0271-7710, Tisdell, J ORCID: 0000-0001-9949-1644 and Evans, S 2017 , 'How do people design a mechanism? Experimental evidence' , Economic Record, vol. 93, no. 302 , pp. 379-394 , doi: 10.1111/1475-4932.12336.

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Abstract

We use an economic experiment to identify how people design a mechanism. Our experimental framework is adapted from the market framework utilised by Maskin and Riley, who considered a monopolist seller of a homogeneous good that uses non-linear pricing under incomplete information. Approximately 30 per cent of participants’ offers in each treatment were incentive-compatible (separating) double offers, a requirement of the optimal mechanism. A similar percentage of offers in each treatment were single (nonseparating) offers, which do not require participants to address incentive compatibility. After sufficient rounds, the design of double offers converged to the schedule identified by Maskin and Riley, while the design of single offers converged to the optimal nonseparating (single) offer.

Item Type: Article
Authors/Creators:Sibly, H and Tisdell, J and Evans, S
Keywords: market theory, experimental economics
Journal or Publication Title: Economic Record
Publisher: Wiley-Blackwell Publishing Asia
ISSN: 0013-0249
DOI / ID Number: 10.1111/1475-4932.12336
Copyright Information:

Copyright 2017 Economic Society of Australia

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