Events at CERGE-EI

Dr. Anna Gunnthorsdottir

Vienna University of Economics and Business, Austria

Abstract: Gunnthorsdottir, Vragov, Seifert & McCabe (2010) introduced a bi-level variation of a standard social dilemma game, called “Group-based Meritocracy Mechanism” (GBM). In a GBM, players compete for membership in stratified teams based on the social contribution they make. The GBM has an asymmetric, highly efficient equilibrium that is hard to detect. Yet experimental subjects coordinate this equilibrium without consciously knowing it, without communicating, and apparently without learning. Kahneman (1988) coined the term “Magic” for phenomena of this kind of phenomenon, but the “Magic” that occurs in experimental tests of GBM mechanisms is much more complex than previously observed.

Early GBM studies assumed that all society members have equal ability to contribute. In naturally occurring societies however, individual abilities differ. New findings from the GBM are that when abilities to contribute differ 1) the highly efficient equilibrium also often exists but becomes more complex and 2) experimental subjects still manage to coordinate it “magically”.

In addition to demonstrating that groups can tacitly coordinate non-obvious asymmetric equilibria in a manner not yet fully understood, the experimental results from the GBM mechanism have a potential social implication: They suggest that humans respond predictably and efficiently to merit-based social organization as compared to social organization based on class, race or gender.

Full Text:  “‘Magic’ – The Predictive Power of the Nash Equilibrium under Merit-based Social Organization”