Using Neural Measures of Economic Value to Solve the Public Goods Free-Rider Problem
Ian Krajbich,2
Colin Camerer,1,2
John Ledyard,2
Antonio Rangel1,2,*
Every social group needs to decide when to provide public goods
and how to allocate the costs among its members. Ideally, this
decision would maximize the group’s net benefits while
also ensuring that every individual’s benefit is greater
than the cost he or she has to pay. Unfortunately, the economic
theory of mechanism design has shown that this ideal solution
is not feasible when the group leadership does not know the
values of the individual group members for the public good.
We show that this impossibility result can be overcome in laboratory
settings by combining technologies for obtaining neural measures
of value (functional magnetic resonance imaging–based
pattern classification) with carefully designed institutions
that allocate costs based on both reported and neurally measured
values.
2 Division of Humanities and Social Sciences, California Institute of Technology, Pasadena, CA 91125, USA.
* To whom correspondence should be addressed. E-mail: rangel{at}hss.caltech.edu
