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A compensation election for binary social choice.

Ryan D Oprea1, Vernon L Smith, Abel M Winn

  • 1Interdisciplinary Center for Economic Sciences, 4400 University Drive MSN 1B2, George Mason University, Fairfax, VA 22030, USA.

Proceedings of the National Academy of Sciences of the United States of America
|January 12, 2007
PubMed
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This study on the Compensation Election mechanism found that while strategic bidding is possible, it's uncommon. More participants lead to more truthful value revelation in group decisions.

Area of Science:

  • Behavioral Economics
  • Decision Science
  • Game Theory

Background:

  • Group decisions often involve binary choices between alternatives like policy changes or rule implementations.
  • Individual valuations for these alternatives vary, with some benefiting, some incurring costs, and others remaining unaffected.

Purpose of the Study:

  • To experimentally evaluate the properties of the Compensation Election, a novel bidding mechanism for group binary choices.
  • To understand bidder behavior, including strategic misrepresentation of values, within this mechanism.

Main Methods:

  • Subjects participated in a simulated group decision-making scenario using the Compensation Election mechanism.
  • Bids represented willingness to pay for a preferred option or compensation for an undesired one.

Related Experiment Videos

  • The option with the highest aggregate bid sum was selected.

    • Main Results:

    • Subjects generally did not engage in strategic overbidding or bidding for non-preferred options.
    • Increased number of bidders positively correlated with more truthful revelation of individual values.

    Conclusions:

    • The Compensation Election mechanism appears robust against widespread strategic manipulation in simple binary choice scenarios.
    • The mechanism's truth-telling properties improve with a larger number of participants, enhancing its reliability for group decision-making.