New Economics Papers
on Collective Decision-Making
Issue of 2009‒09‒11
nine papers chosen by

  1. Electoral Competition when Candidates are Better Informed than Voters By Thomas Jensen
  2. Club-in-the-Club: Reform under Unanimity By Erik Berglöf; Mike Burkart; Guido Friebel; Elena Paltseva
  3. How quorum rules distort referendum outcomes: evidence from a pivotal voter model By Luís Francisco Aguiar; Pedro C. Magalhães
  4. Voters hold the key: lock-in, mobility, and the portability of property tax exemptions By Ron Cheung; Chris Cunningham
  5. Do Re-election Probabilities Influence Public Investment? By Fiva, Jon H.; Natvik, Gisle James
  6. The Anti-Doping Rules By National Anti-Doping Agency NADA
  7. An Interdisciplinary Approach to Coalition Formation By Rudolf Berghammer; Agnieszka Rusinowska; Harrie De Swart
  8. Positive Constitutional Economics II—A Survey of Recent Developments By Stefan Voigt
  9. Why Hierarchy? Communication and Information Acquisition in Organizations By Junichiro Ishida

  1. By: Thomas Jensen (Department of Economics, University of Copenhagen)
    Abstract: In this paper we study the functioning of representative democracy when politicians are better informed than the electorate about conditions relevant for policy choice. We consider a model with two states of the world. The distribution of voters' preferred policies shifts with the state. The two candidates are both completely office-motivated but differ in state-dependent quality. Voters have some information about the state but candidates are better informed. If voters' information is unknown to the candidates when they take positions and sufficiently accurate then candidates will, in refined equilibrium, reveal their information by converging to the most likely median. If voters' information is not sufficiently accurate then there is polarization and the candidates'information is not revealed to the voters. We also show that if voters'information is known to the candidates then they will never reveal their information to the voters. The candidates will either pander by converging on the median that is most likely given only the voters'information or be polarized. With respect to welfare, if voters are well informed then they all prefer that their information is unknown to the candidates. However, if voters are not well informed then it is the other way around, all voters prefer that their information is known by the candidates.
    Keywords: electoral competition; uncertainty; information; candidate quality
    JEL: D72 D82
    Date: 2009–07
  2. By: Erik Berglöf (European Bank for Reconstruction and Development); Mike Burkart (Stockholm School of Economics); Guido Friebel (Goethe-Universität Frankfurt); Elena Paltseva (Department of Economics, University of Copenhagen)
    Abstract: In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. In the presence of externalities and an incomplete charter, the threat of forming an "inner organization" can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.
    Keywords: organizations; club good; voting rules; EU integration
    JEL: D2 D7 P4
    Date: 2009–07
  3. By: Luís Francisco Aguiar (Universidade do Minho - NIPE); Pedro C. Magalhães (University of Lisbon, Social Sciences Institute)
    Abstract: In many jurisdictions, whether referendum results are binding depend on certain legally defined quorum requirements. With a pivotal-voter model, we examine how quorum requirements affect voter’s behavior. We conclude that quorums can be the cause of lower turnout and that they can deliver outcomes that are an inadequate basis to make inferences about collective preferences. We further conclude that quorums may help minorities to impose their will on majorities and that they may create a bias against the status quo. Finally, they generate situations under which the secrecy of the vote is called into question.
    Date: 2009
  4. By: Ron Cheung; Chris Cunningham
    Abstract: Since California voters approved Proposition 13 in 1978, fifteen states have enacted caps on the annual growth in assessed property values. These laws often impose a great burden on municipal finances and create horizontal inequity among homeowners. Why do voters choose to limit local government in this way? Reasons may include controlling the power of special interests, addressing agency failures of government officials (the "Leviathan" hypothesis), or preserving the impact of a current but fleeting antitax political alignment. Yet research has found that voters' perception of a limitation's fiscal consequences do not match reality, questioning the rationality of voter behavior. To counter this position, another strand of literature argues that support for tax limitations is driven not by perceptions of government inefficiency but by reasonable expectations of who will ultimately bear the tax limitation's burden. We explore this view by exploiting the differential tax treatment generated by assessment caps in the context of a recent, novel referendum in Florida. We examine voter support for a 2008 constitutional amendment that included a unique provision making the existing assessment cap portable within the state. We test the hypothesis that voters understood the mobility consequences of tax limitations and the net burden of the cap. We find that high potential tax savings and high expected mobility rates result in higher support for portability. We also find that the degree of racial segregation, the presence of nonresidential tax bases, and the share of migrants from out of state all contribute to support for the amendment. Results suggest that voters were as concerned with reducing their own tax share at the expense of other property owners as they were with curtailing local expenditures.
    Date: 2009
  5. By: Fiva, Jon H. (Dept. of Economics, University of Oslo); Natvik, Gisle James (Norges Bank)
    Abstract: We identify exogenous variation in incumbent policymakers’ re-election probabilities and explore empirically how this variation affects the incumbents’ investment in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which public goods to produce using labor and predetermined public capital. Key for the consistency between data and theory is to account for complementarity between physical capital and flow variables in government production.
    Keywords: Political Economics; Strategic Capital Accumulation; Identifying Popularity Shocks
    JEL: E62 H40 H72
    Date: 2009–08–15
  6. By: National Anti-Doping Agency NADA
    Abstract: Anti-Doping Rules, like Competition rules, are rules governing the conditions under which sport is played. Participants accept these rules as a condition of participation in sport. These Anti-Doping Rules are not intended to be subject to, or limited by, the requirements and legal standards applicable to criminal proceedings or employment matters.
    Keywords: doping rules, anti-doping, sport, participation, employment, sports, athletes,
    Date: 2009
  7. By: Rudolf Berghammer (Computer-Aided Program Development - Institute of Computer Science - Christian-Albrechts-Universität, Kiel); Agnieszka Rusinowska (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Harrie De Swart (Faculteit Wijsbegeerte-Logica en taalanalyse - Universiteit van Tilburg)
    Abstract: A stable government is by definition not dominated by any other government. However, it may happen that all governments are dominated. In graph-theoretic terms this means that the dominance graph does not possess a source. In this paper we are able to deal with this case by a clever combination of notions from different fields, such as relational algebra, graph theory and social choice theory, and by using the computer support system RelView for computing solutions and visualizing the results. Using relational algorithms, in such a case we break all cycles in each initial strongly connected component by removing the vertices in an appropriate minimum feedback vertex set. In this way we can choose a government that is as close as possible to being un-dominated. To achieve unique solutions, we additionally apply the majority ranking recently introduced by Balinski and Laraki. The main parts of our procedure can be executed using the RelView tool. Its sophisticated implementation of relations allows to deal with graph sizes that are sufficient for practical applications of coalition formation.
    Keywords: Graph theory; RelView; relational algebra; dominance; stable government
    Date: 2009
  8. By: Stefan Voigt (MACIE (Philipps University Marburg), Barfüßertor 2, 35032 Marburg, Germany; CESifo; ICER, Torino)
    Abstract: Analysis of the economic effects of constitutional rules has made substantial progress over the last decade. This survey provides an overview of this rapidly growing research area and also discusses a number of methodological issues and identifies underresearched areas. It argues that the next logical step of Positive Constitutional Economics is to endogenize constitutional rules.
    Keywords: Positive Constitutional Economics, Constitutional Political Economy, Economic Effects of Constitutions, New Institutional Economics, Endogenous Constitutions
    JEL: H11 K10 O17 O43 P51
    Date: 2009
  9. By: Junichiro Ishida
    Abstract: In most firms, if not all, workers are divided asymmetrically in terms of authority and responsibility. In this paper, we view the asymmetric allocations of authority and responsibility as essential features of hierarchy and examine why hierarchies often prevail in organizations from that perspective. The focus of attention is on the tradeoff between costly information acquisition and costless communication. When the agency problem concerning information acquisition is sufficiently severe, the contractual arrangement which allocates responsibility asymmetrically often emerges as the optimal organizational form, which gives rise to the chain of command pertaining to hierarchical organizations. This explains why hierarchies often prevail in firms since a relatively fixed group of members must confront with new problems and come up with solutions on the day-to-day basis, and hence the agency problem is an issue to be reckoned with.
    Date: 2009–08

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