Theme: A Deduction Mechanism for Public Goods Provision

Guest Speaker: Prof. Dr. Jaimie Wei-Hung Lien

Time: July 5th, 2024 (Friday), 9:30-11:30 am.

Venue: Room 318, Business School Building

Organizer: The Department of Economics

Guest Bio:

Prof. Dr. Jaimie Wei-Hung Lien is a professor and doctoral supervisor at the Graduate School of Economics, Shandong University, and a Distinguished Professor of Shandong University. She received her bachelor's degree from Wellesley College for Women in the United States, and her master's degree and doctorate degree from the University of California, San Diego in the United States. She has served as guest editor and editorial board member of several international academic journals, including North American Journal of Economics and Finance, reviewer for government research funding agencies in mainland China, Hong Kong, Taiwan, and Singapore, external reviewer for faculty promotion in several universities, anonymous reviewer for 31 journals, and has been awarded Outstanding Reviewer several times. Her research areas include behavioral economics, experimental economics, and applied microeconomics. She has chaired the National Natural Science Foundation of China, the Ministry of Education, and the Hong Kong Research Grants Council. Her papers have been published in Nature Communications, PNAS, American Economic Review (Papers and Proceedings), Games and Economic Behavior, and other international journals. She was awarded the "China Information Economics 2016 Youth Innovation Award", "China Information Economics 2018 Youth Innovation Award", and "China Information Economics 2011-2015 Theory Contribution Award".

Synopsis：

We propose a simple commitment mechanism prior to a public goods contribution game. Each player simultaneously and independently proposes a deduction rate, which serves as a proposal for the rate by which the return on private investment accounts will be reduced. The group deduction rate is determined by the minimum level of the individually proposed rates. In the two-stage game with linear payoffs, the first-best outcome is achieved in the refined equilibrium, with a sufficiently high group deduction rate being chosen. The mechanism also improves efficiency for non-linear games. We conduct a laboratory experiment to empirically investigate whether and how our counter-intuitive mechanism works. The experimental findings highlight the importance of learning opportunities via examples. Even with repeated play, many subjects persist in choosing low deduction rates and therefore, welfare remains low. However, with exogenously given examples of group deduction rates, subjects learn quickly and achieve efficient outcomes when they later determine the deduction rates endogenously.