nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2009‒02‒14
eleven papers chosen by
Roland Kirstein
Otto von Guericke University Magdeburg

  1. Production in Incomplete Markets: Expectations Matter for Political Stability By Hervé Crès; Mich Tvede
  2. A Theory of Political Competition over Military Policy and Income Redistribution By Naoki Yoshihara
  3. The Labor Market of Italian Politicians By Antonio Merlo; Vincenzo Galasso; Massimiliano Landi; Andrea Mattozzi
  4. Individual versus group strategy-proofness: when do they coincide? By Salvador Barberà; Dolors Berga; Bernardo Moreno
  5. On the General Existence of Pure Strategy Political Competition Equilibrium in Multi-dimensional Party-Faction Models By Naoki Yoshihara
  6. Bargaining one-dimensional policies and the efficiency of super majority rules By Clara Ponsatí; Daniel Cardona
  7. Living in Two Neighborhoods – Social Interaction Effects in the Lab By Armin Falk; Urs Fischbacher; Simon Gaechter
  8. Judgment aggregators and Boolean algebra homomorphisms By Frederik Herzberg
  9. On Initial Conferment of Individual Rights By Kotaro Suzumura; Naoki Yoshihara
  10. Political Institutions and Human Development Does Democracy Fulfill its 'Constructive' and 'Instrumental' Role? By Vollmer, Sebastian; Ziegler, Maria
  11. Corporate Control and Multiple Large Shareholders By Dhillon, Amrita; Rossetto, Silvia

  1. By: Hervé Crès (Sciences Po (Paris Institute of Political Studies)); Mich Tvede (Department of Economics, University of Copenhagen)
    Abstract: In the present paper we study voting-based corporate control in a general equilibrium model with incomplete financial markets. Since voting takes place in a multi-dimensional setting, super-majority rules are needed to ensure existence of equilibrium. In a linear-quadratic setup we show that the endogenization of voting weights (given by portfolio holdings) can give rise to - through self-fulfilling expectations - dramatical political instability, i.e. Condorcet cycles of length two even for very high majority rules.
    Keywords: D21; D52; D71; D72
    JEL: D63 I32 O15
    Date: 2009–01
  2. By: Naoki Yoshihara
    Abstract: We discuss political competition games between Left and Right parties, in which the policy space is two dimensional. One issue is the choice of proportional tax rate, and the second is the allocation of tax revenue between military policies and social welfare policies. On these political issues, the stylized fact is that left-wing parties prefer higher tax rates and lower military expenditure than do right-wing parties. We examine the kinds of political environments in which this fact can be rationalized as the equilibrium outcome of a given political game. By adopting the notion of the party-unanimity Nash equilibrium [Roemer (1998; 1999; 2001; 2005)], not only votersf economic motivations, but also their ideological positions are shown to be crucial factors in explaining stylized party behavior.
    Keywords: multidimensional political competition games, partyunanimity Nash equilibria, military expenditure, ideological concerns
    JEL: C62 C72 D72 D78
    Date: 2008–06
  3. By: Antonio Merlo; Vincenzo Galasso; Massimiliano Landi; Andrea Mattozzi
    Abstract: In this study, we analyze the career profiles of Italian politicians in the post-war period. Using a unique, newly collected data set that contains detailed information on all the politicians who have been elected to the Italian Parliament between 1948 and 2008, we address a number of important issues that pertain to: (1) their career paths prior to election to Parliament; (2) their parliamentary careers; and (3) their post-Parliament employment. Our data encompass two institutional regimes: the First Republic (1948-1993) and the Second Republic (1993-present), characterized by different electoral rules and party structures. After providing a comprehensive view of the career profiles of Italian politicians over the entire sample period, we highlight the major differences between the First and the Second Republic. We also compare the career paths of Italian legislators to those of the members of the United States Congress.
    Keywords: political careers, career politicians, Republic of Italy
    JEL: D72 J44 J45
    Date: 2008
  4. By: Salvador Barberà; Dolors Berga; Bernardo Moreno
    Abstract: A social choice function is group strategy-proof on a domain if no group of agents can manipulate its final outcome to their own benefit by declaring false preferences on that domain. Group strategy-proofness is a very attractive requirement of incentive compatibility. But in many cases it is hard or impossible to find nontrivial social choice functions satisfying even the weakest condition of individual strategy-proofness. However, there are a number of economically significant domains where interesting rules satisfying individual strategy-proofness can be defined, and for some of them, all these rules turn out to also satisfy the stronger requirement of group strategy-proofness. This is the case, for example, when preferences are single-peaked or single-dipped. In other cases, this equivalence does not hold. We provide sufficient conditions defining domains of preferences guaranteeing that individual and group strategy-proofness are equivalent for all rules defined on the
    Keywords: Strategy-proofness, Group strategy-proofness, k-size strategy-proofness, Sequential inclusion, Single-peaked preferences, Single-dipped preferences, Separable preferences.
    JEL: D71
    Date: 2009–02–04
  5. By: Naoki Yoshihara
    Abstract: In this paper, we consider political competition games of two parties in multi-dimensional policy spaces, where the two parties have two factions, opportunists and militants, that intra-party bargain with each other. In such a game, we adopt the party-unanimity Nash equilibrium (PUNE) [Roemer (1998; 1999; 2001)] as an appropriate solution concept, and examine the general existence problem of this. In particular, we suppose that any faction of each party does not necessarily have dictatorial power. We then provide a general existence theorem for PUNE in this class of games.
    Keywords: multi-dimensional political competition games, partyunanimity Nash equilibria, pure-compromise PUNE
    JEL: M12 M5 J31 J33
    Date: 2008–11
  6. By: Clara Ponsatí; Daniel Cardona
    Abstract: We consider negotiations selecting one-dimensional policies. Individuals have single-peaked preferences, and they are impatient. Decisions arise from a bargaining game with random proposers and (super) majority approval, ranging from the simple majority up to unanimity. The existence and uniqueness of stationary subgame perfect equilibrium is established, and its explicit characterization provided. We supply an explicit formula to determine the unique alternative that prevails, as impatience vanishes, for each majority. As an application, we examine the efficiency of majority rules. For symmetric distributions of peaks unanimity is the unanimously preferred majority rule. For asymmetric populations rules maximizing social surplus are characterized.
    Date: 2008–12–17
  7. By: Armin Falk (University of Bonn); Urs Fischbacher (University of Konstanz); Simon Gaechter (University of Nottingham)
    Abstract: Field evidence suggests that people belonging to the same group often behave similarly, i.e., behavior exhibits social interaction effects. We conduct a laboratory experiment that avoids the identification problem present in the field and allows us to study the behavioral logic of social interaction effects. Our novel design feature is that each subject is simultaneously a member of two randomly assigned and identical groups where only members (‘neighbors’) are different. We study behavior in a coordination game with multiple equilibria and a public goods game, which has only one equilibrium in material payoffs. We speak of social interactions if the same subject at the same time makes group-specific decisions that depend on their respective neighbors’ decisions. We find that a majority of subjects exhibits social interaction effects both when the game has multiple equilibria in material payoffs and when it only has one equilibrium.
    Keywords: Social interactions, identification, experiments, coordination, cooperation
    JEL: C91 H41 K42 H26
    Date: 2009–01
  8. By: Frederik Herzberg (Institute of Mathematical Economics, Bielefeld University)
    Abstract: The theory of Boolean algebras can be fruitfully applied to judgment aggregation: Assuming universality, systematicity and a sufficiently rich agenda, there is a correspondence between (i) non-trivial deductively closed judgment aggregators and (ii) Boolean algebra homomorphisms defined on the power-set algebra of the electorate. Furthermore, there is a correspondence between (i) consistent complete judgment aggregators and (ii) 2-valued Boolean algebra homomorphisms defined on the power-set algebra of the electorate. Since the shell of such a homomorphism equals the set of winning coalitions and since (ultra)filters are shells of (2-valued) Boolean algebra homomorphisms, we suggest an explanation for the effectiveness of the (ultra)filter method in social choice theory. From the (ultra)filter property of the set of winning coalitions, one obtains two general impossibility theorems for judgment aggregation on finite electorates, even without the Pareto principle.
    Keywords: judgment aggregation, systematicity, impossibility theorems, filter, ultrafilter, Boolean algebra, homomorphism
    JEL: D71
    Date: 2009–02
  9. By: Kotaro Suzumura; Naoki Yoshihara
    Abstract: An extended social choice framework is proposed for the analysis of initial conferment of individual rights. It captures the intuitive conception of decisionmaking procedure as a carrier of intrinsic value along with the instrumental usefulness thereof in realizing valuable culmination outcomes. Our model of social decision-making consists of two stages. In the first stage, the society decides on the game form rights-system to be promulgated. In the second stage, the promulgated game form rights-system, coupled with the revealed profile of individual preference orderings over the set of culmination outcomes, determines a fully-fledged game, the play of which determines a culmination outcome at the Nash equilibrium. A set of sufficient conditions for the existence of a democratic social choice procedure, which chooses a game form in the first stage that is not only liberal, efficient and Nash solvable, but also uniformly workable for every revealed profile of individual preference orderings over the set of culmination outcomes, is identified.
    Keywords: Extended alternative; Extended constitution function; Uniformly rational choice; Liberal game form; Non-consequentialist evaluation of rightssystem
    JEL: D63 D71
    Date: 2008–05
  10. By: Vollmer, Sebastian (University of GAottingen); Ziegler, Maria (University of GAottingen)
    Abstract: Institutions are a major field of interest in the study of development processes. The authors contribute to this discussion concentrating our research on political institutions and their effect on the non-income dimensions of human development. First, they elaborate a theoretical argument why and under what conditions democracies compared to autocratic political systems might perform better with regards to the provision of public goods. Due to higher redistributive concerns matched to the needs of the population democracies should show a higher level of human development. In the following they analyze whether our theoretical expectations are supported by empirical facts. The authors perform a static panel analysis over the period of 1970 to 2003. The model confirms that living in a democratic system positively affects human development measured by life expectancy and literacy rates even controlling for GDP. By analyzing interaction effects they find that the performance of democracy is rather independent of the circumstances. However, democracy leads to more redistribution in favor of health provision in more unequal societies.
    Keywords: human development; democracy; political institutions; life expectancy; literacy; panel analysis
    JEL: H11 I10 I20
    Date: 2009–01–01
  11. By: Dhillon, Amrita (University of Warwick); Rossetto, Silvia (Toulouse School of Economics and University of Warwick)
    Abstract: Many firms have more than one blockholder, but finance theory suggests that one blockholder should be sufficient to bestow all benefits on a firm that arise from concentrated ownership. This paper identifies a reason why more blockholders may arise endogenously. We consider a setting where multiple shareholders have endogenous conflicts of interest depending on the size of their stake. Such conflicts arise because larger shareholders tend to be less well diversified and would therefore prefer the firm to pursue more conservative investment policies. When the investment policy is determined by a shareholder vote, a single blockholder may be able to choose an investment policy that is far away from the dispersed shareholders' preferred policy. Anticipating this outcome reduces the price at which shares trade. A second blockholder (or more) can mitigate the conflict by shifting the voting outcome more towards the dispersed shareholders' preferred investment policy and this raises the share price. The paper derives conditions under which there are blockholder equilibria.The model shows how different ownership structures affect firm value and the degree of underpricing in an IPO.
    Date: 2009

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