POWRE: An Experimental Study of Cost Sharing and Rationing Mechanisms

点击翻译按钮获取中文摘要

The goal of this research is to test experimentally mechanisms designed to share common resources and costs. This project is a natural extension of theoretical research by the PI on pricing mechanisms. In this previous work supported by NSF, a framework for a particular mechanism, the "Serial Cost Sharing Rule," was developed to be implemented as an auction. Because of its powerful incentive properties, the serial cost-sharing rule can be used to price and allocate scarce resources in a way that accurately reflects the underlying needs. When resources are limited and there is contention among agents, however, rationing needs to be employed in conjunction with cost sharing. Theoretically developed cost sharing and rationing mechanisms are not typically tested experimentally. Contributions to the theory will be to generalize probabilistic rationing mechanisms. The PI will bring subjects into the laboratory to observe and study their responses to realistic incentives and institutions when sharing and paying for a common resource. The subjects will decide about the quantities when confronted with a specific cost sharing or rationing rule. The subjects' choices and decisions will be compared with predictions from the theoretical models. Large and complex organizations face a continual challenge of allocating common shared resources efficiently and effectively. The allocation problem is complicated for the planners when these shared resources are scarce. This can be further aggravated if demanders overstate their case for desired resources in order to ensure access. As a result, the decision-makers charged with the task of allocating the resources may not have an accurate representation of actual needs. A great deal of attention has been devoted to developing mechanisms for cost sharing and rationing. However, this body of work has virtually ignored the crucial question of to what extent can these mathematical mechanisms be implemented and tested in an actual decision environment. Thus, this research has potential to make a significant contribution in the interface between theory and experimental research.The PI is an assistant professor who is working on combining theoretical and experimental research in mechanism design. To accomplish this, she will use the newly created facilities at the Mississippi Experimental Research Laboratory (MERL). Access to this facility will allow the PI to conduct research that will complement and advance her previous theoretical work. With this POWRE award the PI will acquire new skills in experimental economics.