Harold Nax (ETH, Zurch): Meritocracy and the efficiency-equality tradeoff: the case of public goods

Abstract: One of the fundamental tradeoffs underlying society is that between equality and efficiency. The challenge for institutional design is to strike the right balance. Game-theoretic models of public goods provision under assortativity succinctly capture this tradeoff: under complete non-assortativity (society is randomly formed), theory predicts maximal inefficiency but perfect equality; higher levels of assortativity (society matches contributors with contributors) are predicted to improve efficiency but come at the cost of growing inequality. In this talk, I will discuss theoretical analysis of such situations and present findings from an experiment we conducted to test this tradeoff. An important element driving behavior will be fairness considerations, with the meaning of fairness shown to depend on the regime context.