New Economics Papers
on Collective Decision-Making
Issue of 2008‒03‒08
eleven papers chosen by

  1. An Agenda-Setting Model of Electoral Competition By Josep M. Colomer; Humberto Llavador
  2. Does partisan alignment affect the electoral reward of intergovernmental transfers? By Albert Solé-Ollé; Pilar Sorribas-Navarro
  3. Democracy, Collective Action and Intra-elite Conflict By Ghosal, Sayantan; Proto, Eugenio
  4. Collective Choice Rules on Convex Restricted Domains By Storcken Ton
  5. Political parties and the economy: Macro convergence, micro partisanship? By Pau Castells; Francesc Trillas
  6. Isolation, Assurance and Rules : Can Rational Folly Supplant Foolish Rationality? By Peter J. Hammond
  7. Conflict Leads to Cooperation in Nash Bargaining By Kareen Rozen
  8. When is there state independence? By Brian, HILL
  9. Sen’s Capability Approach as a new social-liberal paradigm (In French) By Alexandre BERTIN
  10. Why Do Politicians Implement Central Bank Independence Reforms? By Daunfeldt, Sven-Olov; Hellström, Jörgen; Landström, Mats
  11. Board structures around the world: An experimental investigation By Ann B. Gillette; Thomas H. Noe; Michael J. Rebello

  1. By: Josep M. Colomer; Humberto Llavador
    Abstract: This paper presents a model of electoral competition focusing on the formation of the public agenda. An incumbent government and a challenger party in opposition compete in elections by choosing the issues that will key out their campaigns. Giving salience to an issue implies proposing an innovative policy proposal alternative to the status-quo. Parties trade off the issues with high salience in voters’ concerns and those with broad consensus on some policy proposal. Each party expects a higher probability of victory if the issue it chooses becomes salient in the voters’ decision. Remarkably, the issues which are considered the most important ones by a majority of votes may not be given salience during the electoral campaign. An incumbent government may survive in spite of its bad policy performance if there is no sufficiently broad consensus on a policy alternative. We illustrate the analytical potential of the model with the case of the United States presidential election in 2004.
    Keywords: Agenda, elections, political competition, issues, salience, consensus
    JEL: D72
    Date: 2008–02
  2. By: Albert Solé-Ollé (Universitat de Barcelona (UB); Institut d'Economia de Barcelona (IEB); CESifo); Pilar Sorribas-Navarro (Universitat Barcelona (UB); Institut d'Economia de Barcelona (IEB))
    Abstract: In this paper we test the hypothesis that intergovernmental grants allocated to co-partisans buy more political support than grants allocated to local governments controlled by opposition parties. We use a rich Spanish database containing information about the grants received by 617 municipalities during the period 1993-2003 from two different upper-tier governments (Regional and Upper-local), as well as data of municipal voting behaviour at three electoral contests held at the different layers of government during this period. Therefore, we are able to estimate two different vote equations, analysing the effects of grants given to aligned and unaligned municipalities on the vote share of the incumbent party/parties at the regional and local elections. We account for the endogeneity of grants by instrumenting them with the average amount of grants distributed by upper-layer governments. The results suggest that grants given to co-partisans buy some political support, but that grants given to opposition parties do not bring any votes, suggesting that the grantee reaps as much political credit from intergovernmental grants as the grantor
    Keywords: Voting, parties, grants.
    JEL: C72 D72
    Date: 2008
  3. By: Ghosal, Sayantan (Department of Economics, University of Warwick); Proto, Eugenio (Department of Economics, University of Warwick)
    Abstract: This paper studies the conditions under which intra-elite conflict leads to a democracy. There are two risk averse elites competing for the appropriation of a unit of social surplus, with an ex-ante uncertainty about their future relative bargaining power, and a large non-elite class unable to act collectively. We characterize a democracy as consistng of both franchise extension to, and lowering the cost of collective political activity for, individuals in the non-elite. In the absence of democracy, the stronger elite is always able to appropriate the entire surplus. We show that in a democracy, the newly enfranchised non-elite organize and always prefer to form a coalition with weaker elite against the stronger resulting in a more balanced surplus allocation between the two elites. Accordingly, the elites choose to democratize if they are sufficiently risk averse. Our formal analysis can account for stylized facts that emerge from a comparative analysis of Indian and Western European democracies.
    Keywords: Democracy, conflict ; collective action ; coalition formation ; party formation ; bargaining ; risk-sharing
    JEL: D74 O12 H11
    Date: 2008
  4. By: Storcken Ton (METEOR)
    Abstract: We study sets of preferences that are convex with respect to the betweeness relation induced by the Kemeny distance for preferences. It appears that these sets consist of all preferences containing a certain partial ordering and the other way around all preferences containing a given partial ordering form a convex set. Next we consider restricted domains where each agent has a convex set of preferences. Necessary and sufficient conditions are formulated under which a restricted domain admits unanimous, strategy-proof and non-dictatorial choice rules. Loosely speaking it boils down to admitting monotone and non-image-dictatorial decision rules on two alternatives where the other alternatives are completely disregarded.
    Keywords: mathematical economics;
    Date: 2008
  5. By: Pau Castells (Institut d'Economia de Barcelona (IEB)); Francesc Trillas (Institut d'Economia de Barcelona (IEB); Universitat Autònoma de Barcelona (UAB))
    Abstract: In the last days of the electoral campaign for the 2004 general election in Spain, on Thursday March 11th 2004, a series of simultaneous terror attacks caused the death of 191 persons in commuting trains in the capital Madrid. Four days later, the opposition party won the election, against all predictions that were made prior to the terror attacks. This change in expectations presents a unique opportunity to take advantage of event study techniques to test some politico-economic hypotheses. The quantitative exercise is carried out employing Seemingly Unrelated Regressions (SUR). Hypothesis testing is improved by means of bootstrapping techniques. Convergence theories prove quite resilient as, jointly, quoted firms were not significantly affected by the election outcome. The results on the impact on particular companies and industries, however, suggest that a combination of capture and agency problems may play a role in explaining the effects of the change in expectations.
    Keywords: Event study, median voter, agency, capture, elections.
    JEL: G14 G15
    Date: 2008
  6. By: Peter J. Hammond (Department of Economics, University of Warwick)
    Abstract: Consider an “isolation paradox” game with many identical players. By definition, conforming to a rule which maximizes average utility is individually a strictly dominated strategy. Suppose, however, that some players think “quasi-magically” in accordance with evidential (but not causal) decision theory. That is, they act as if others’ disposition to conform, or not, is affected by their own behavior, even though they do not actually believe there is a causal link. Standard game theory excludes this. Yet such “rational folly” can sustain “rule utilitarian” cooperative behavior. Comparisons are made with Newcomb’s problem, and with related attempts to resolve prisoner’s dilemma.
    Date: 2008
  7. By: Kareen Rozen (Cowles Foundation, Yale University)
    Abstract: We consider a Nash demand game where N players come to the bargaining table with requests for coalition partners and a potentially generated resource. We show that group learning leads to complete cooperation and an interior core allocation with probability one. Our arguments highlight group dynamics and demonstrate how destructive group behaviors -- exclusion, divide and conquer tactics, and scapegoating -- can propel groups toward beneficial and self-enforcing cooperation.
    Keywords: Nash bargaining, Learning, Core, Group conflict
    JEL: C7
    Date: 2008–03
  8. By: Brian, HILL
    Abstract: It has been noticed that whether a preference relation can be represented by state-independent utilities as opposed to state-dependent utilities may depend on which acts count as constant acts [Schervish et al., 1990]. Indeed, this remark underlies an extension of Savage’s expected utility theory to the state-dependent case that was proposed by Edi Karni [Karni, 1993]. This paper contains a characterisation of the preference relations that permit a choice of acts which can play the role of constant acts, and relative to which there is a representation involving a state-independent utility function. This result applies both in the Savage and in the Anscombe & Aumann frameworks. It has as an immediate corollary an extension of Karni’s representation theorem. Finally, it is of methodological interest, insofar that it harnesses techniques from mathematical logic to prove a theorem of interest to decision theorists and economists.
    Keywords: Subjective expected utility; State-dependent utility; Monotonicity axiom
    JEL: C69 D81
    Date: 2007–11–22
  9. By: Alexandre BERTIN
    Abstract: The goal of this paper is to show that Amartya Sen’s idea can be rooted in the social-liberal paradigm. Combining the respect of an unconditional freedom and the research of a real equality, Sen, thanks to the Capability Approach, proposes a framework for a new theory of justice.
    Keywords: capabilities, social-liberalism, democracy, liberalism, socialism
    JEL: B10 B14 B24 I0 I30
    Date: 2008
  10. By: Daunfeldt, Sven-Olov (The Swedish Retail Institute (HUI)); Hellström, Jörgen (Department of Economics); Landström, Mats (Department of Economics)
    Abstract: It is something of a puzzle that politicians around the world have chosen to give up power to independent central banks, thereby reducing their possibilities to fine-tune the economy. In this paper the determinants of central bank independence (CBI) reforms are studied using a new data set on the possible event of such reforms in 119 countries. According to the data, as much as 81 countries had implemented CBI-reforms during the study period. The results indicate, moreover, that policymakers are more likely to delegate power to independent central banks when the foreign debt is relatively high. In non-OECD countries, the likelihood of a CBI-reform also seems to increase when policymakers face a high probability of getting replaced.
    Keywords: Central bank independence; political economy
    JEL: E42 E58 E61 P16
    Date: 2008–02–29
  11. By: Ann B. Gillette; Thomas H. Noe; Michael J. Rebello
    Abstract: We model and experimentally examine the board structure-performance relationship. We examine single-tiered boards, two-tiered boards, insider-controlled boards, and outsider-controlled boards. We find that even insider-controlled boards frequently adopt institutionally preferred rather than self-interested policies. Two-tiered boards adopt institutionally pre- ferred policies more frequently but tend to destroy value by being too conservative, frequently rejecting good projects. Outsider-controlled single-tiered boards, both when they have multiple insiders and only a single insider, adopt institutionally preferred policies most frequently. In those board de-signs where the efficient Nash equilibrium produces strictly higher payoffs to all agents than the coalition-proof equilibria, agents tend to select the efficient Nash equilibria.
    Date: 2008

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