Dynamic Resource Allocation with Karma: An Experimental Study

TL;DR

It is confirmed that karma has significant and sustained welfare benefits even in a population with no prior training, and mechanism usage is identified in contexts with sporadic high urgency, more so than with frequent moderate urgency.

Abstract

A system of non-tradable credits that flow between individuals like karma, hence proposed under that name, is a mechanism for repeated resource allocation that comes with attractive efficiency and fairness properties, in theory. In this study, we test karma in an online experiment in which human subjects repeatedly compete for a resource with time-varying and stochastic individual preferences or urgency to acquire the resource. We confirm that karma has significant and sustained welfare benefits even in a population with no prior training. We identify mechanism usage in contexts with sporadic high urgency, more so than with frequent moderate urgency, and implemented as a simple (binary) karma bidding scheme as particularly effective for welfare improvements: relatively larger aggregate efficiency gains are realized that are (almost) Pareto superior. These findings provide guidance for further testing and for future implementation plans of such mechanisms in the real world.

Figures (7)

• Figure 1: Landing page.
• Figure 2: Detailed instructions page (corresponding to the low stake, full range treatment).
• Figure 3: Decision page examples.
• Figure 4: Results page example.
• Figure 5: Robustness of Figure \ref{['fig:mean-efficiency-gains-groups']} to the choice of means vs. medians.