Fairness and the Optimal Allocation of Ownership Rights

We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players

An Algorithmic Framework for Strategic Fair Division

We study the paradigmatic fair division problem of allocating a divisible good among agents with heterogeneous preferences, commonly known as cake cutting. Classical cake cutting protocols are susceptible to manipulation. Do their strategic outcomes still guarantee fairness? To address this question we adopt a novel algorithmic approach, by designing a concrete computational framework for fair division---the class of Generalized Cut and Choose (GCC) protocols}---and reasoning about the game-theoretic properties of algorithms that operate in this model. The class of GCC protocols includes the most important discrete cake cutting protocols, and turns out to be compatible with the study of fair division among strategic agents. In particular, GCC protocols are guaranteed to have approximate subgame perfect Nash equilibria, or even exact equilibria if the protocol's tie-breaking rule is flexible. We further observe that the (approximate) equilibria of proportional GCC protocols---which guarantee each of the $n$ agents a $1/n$-fraction of the cake---must be (approximately) proportional. Finally, we design a protocol in this framework with the property that its Nash equilibrium allocations coincide with the set of (contiguous) envy-free allocations

Elite Capture, Political Voice and Exclusion from Aid: An Experimental Study

We experimentally study the influence of local information conditions on elite capture and social exclusion in community-based development schemes with heterogeneous groups. Not only information on the distribution of aid resources through community-based schemes, but also information on who makes use of an available punishment mechanism through majority voting may be important. The main results are the following. First, many rich community representatives try to satisfy a political majority who would then abstain from using the punishment mechanism, and exclude those community members whose approval is then not required. The frequency of this exclusion strategy is highest with private information on the distribution and public voting. Second, when voting is public, responders are more reluctant to make use of the punishment mechanism, and representatives who follow the exclusion strategy are more inclined to exclude the poorest responder. Third, punishment is largely ineffective as it induces rich representatives to capture all economic resources. Fourth, if a poor agent takes the representative’s role, punishment rates drop, efficiency increases, and final distributions become more equal.distribution of aid, inequality, social exclusion, laboratory experiment