It's sometimes awkward when the bill arrives at a
large gathering of people at a restaurant -
figuring out who pays what, &c. Here's an
interesting study of precisely this problem. I'd
be fascinated to hear comments from Madhu (and others!) on this.
Udhay
http://www.chicagocdr.org/cdrpubs/pdf_index/cdr_523.pdf
Abstract
When agents are ascribed selfish motives, economic theory points to grave
inefficiencies resulting from externalities. In
recent years, however, a wealth of
laboratory evidence has questioned the
descriptive validity of the selfish agent
assumption. We study a restaurant setting in
which groups of diners are faced with
different ways of paying the bill. The two main
manipulations are splitting the bill
between the diners and having each pay
individually. We find that, in line with the
classical models prediction, subjects consume
more when the cost is split, resulting in a
substantial loss of efficiency. Moreover, when
asked to choose, diners prefer the
individual pay to the inefficient split-bill method.
These findings have implications in the design of
institutions. Institutions and
rules that ignore the effect of negative
externalities are inefficient not only in theory,
but also in practice. Even when individuals
prefer to be in a different game (e.g., pay
the bill individually instead of splitting it),
when forced to play according to a less
preferred set of rules, they will minimize their
individual losses by taking advantage of
others.
--
((Udhay Shankar N)) ((udhay @ pobox.com)) ((www.digeratus.com))
