Resource Allocation with Karma Mechanisms

TL;DR

This paper reviews Karma mechanisms, non-monetary resource currencies, highlighting their principles, applications, and potential for fair, efficient resource allocation without traditional monetary systems.

Contribution

It provides a comprehensive review, systematic comparison, and a structured framework for designing Karma-based resource allocation mechanisms.

Findings

Karma mechanisms embody fairness and near incentive compatibility.

They can incentivize resource scarcity reduction.

The literature on Karma is diverse and lacks coherence.

Abstract

Monetary markets serve as established resource allocation mechanisms, typically achieving efficient solutions with limited information. However, they are susceptible to market failures, particularly under the presence of public goods, externalities, or inequality of economic power. Moreover, in many resource allocating contexts, money faces social, ethical, and legal constraints. Consequently, research increasingly explores artificial currencies and non-monetary markets, with Karma emerging as a notable concept. Karma, a non-tradeable, resource-inherent currency for prosumer resources, operates on the principles of contribution and consumption of specific resources. It embodies fairness, near incentive compatibility, Pareto-efficiency, robustness to population heterogeneity, and can incentivize a reduction in resource scarcity. The literature on Karma is scattered across disciplines, varies in scope, and lacks of conceptual clarity and coherence. Thus, this study undertakes a comprehensive review of the Karma mechanism, systematically comparing its resource allocation applications and elucidating overlooked mechanism design elements. Through a systematic mapping study, this review situates Karma within its literature context, offers a structured design parameter framework, and develops a road-map for future research directions.