Out-of-equilibrium performance of three Lindahl mechanisms: Experimental evidence

We describe an experimental comparison of the out-of-equilibrium performance of three allocation mechanisms designed to achieve Lindahl outcomes as Nash equilibria: the mechanisms due to Walker (1981), Kim (1993), and Chen (2002). We find that Chen’s mechanism, which is supermodular, converges closest and most rapidly to its equilibrium. However, we find that the properties that move subjects toward equilibrium in Chen’s mechanism typically generate sizeable taxes and subsidies when not in equilibrium, and correspondingly large budget surpluses and deficits, which typically far outweigh the surplus created by providing the public good. The Kim mechanism, on the other hand, converges relatively close to its equilibrium and exhibits much better out-of-equilibrium efficiency properties. JEL codes: H41, C92. The authors are grateful to Yan Chen, James Cox, and P.J. Healy for helpful comments. * [email protected] † [email protected] ‡ [email protected] Corresponding author: Mark Walker, Economics Department, U. of Arizona, Tucson AZ 85721-0108 Telephone: 520-621-6155, Fax: 520-621-8450.