Computer Testbeds: The Dynamics of Groves-Ledyard Mechanisms

We develop a behavioral model as a a computer testbed we can use to study the probable performance of a wide range of mechanisms prior to testing them in a laboratory or using them in practice. In this paper, we describe an implementation of our model and the computer testbed methodology to Groves-Ledyard (1977) mechanisms for provision of public goods. Previous experimental evidence, and some theory, strongly suggest that the value of a free mechanism parameter is important for the dynamic performance of the mechanism (when it is simulated as a repeated game). In our model messages converge to the Nash Equilibrium for all of the values of the mechanism parameter that we studied. However, the convergence times depend on the value of the parameter. Our analysis suggests there are values of the free parameter that result in the fastest convergence. The range of values is robust with respect to the changes in the behavioral model’s parameter values and details of the updating procedures. This prediction is validated with data from experiments with human subjects. JEL classification: D83, C63, C92, H41

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