New Economics Papers
on Collective Decision-Making
Issue of 2009‒10‒24
four papers chosen by

  1. Ideology and Existence of 50%-Majority Equilibria in Multidimensional Spatial Voting Models By Hervé Crès; M. Utku Ünver
  2. Overconfidence, Monetary Policy Committees and Chairman Dominance By Carl Andreas Claussen; Egil Matsen; Øistein Røisland; Ragnar Torvik
  3. The core of games on k-regular set systems. By Lijue Xie; Michel Grabisch
  4. Prediction Markets: A Case Study of Forecasting Cattle on Feed By Karina Gallardo

  1. By: Hervé Crès (Institut d’Études Politiques de Paris); M. Utku Ünver (Boston College)
    Abstract: When aggregating individual preferences through the majority rule in an n-dimensional spatial voting model, the ‘worst-case’ scenario is a social choice configuration where no political equilibrium exists unless a super majority rate as high as 1 − 1/n is adopted. In this paper we assume that a lower d-dimensional (d < n) linear map spans the possible candidates’ platforms. These d ‘ideological’ dimensions imply some linkages between the n political issues. We randomize over these linkages and show that there almost surely exists a 50%-majority equilibria in the above worst-case scenario, when n grows to infinity. Moreover the equilibrium is the mean voter. The speed of convergence (toward 50%) of the super majority rate guaranteeing existence of equilibrium is computed for d = 1 and 2.
    Keywords: Spatial voting, super majority, ideology, mean voter theorem, random point set.
    JEL: D71 D72
    Date: 2008–09–17
  2. By: Carl Andreas Claussen (Sveriges Riksbank and Norges Bank (Central Bank of Norway)); Egil Matsen (Norwegian University of Science and Technology and Norges Bank); Øistein Røisland (Norges Bank (Central Bank of Norway)); Ragnar Torvik (Norwegian University of Science and Technology and Norges Bank)
    Abstract: We suggest that overconfidence among policymakers explains why formal decision power over monetary policy is given to committees, while much of the real power to set policy remains with central bank chairmen. Overconfidence implies that the chairman underweights advice from his staff, increasing policy risk if he alone decides. A committee with decision power reduces this risk, because it induces moderation from the chairman. Overconfidence also yields disagreement and dissent in the committee, consistent with evidence from monetary policy committees. As the chairman is on average better informed, through his wider access to the staff, this would give him a suboptimal influence if policy is set through simple majority voting. Giving the chairman extra decision power, through e.g. agenda-setting rights, restores his influence. A monetary policy committee with a strong chairman balances the risks and influence distortions that occur if policymakers are overconfident.
    Keywords: Central Bank Governance, Monetary Policy Committees, Overcon?dence, Agenda-setting
    JEL: D02 D71 E58
    Date: 2009–10–13
  3. By: Lijue Xie (Centre d'Economie de la Sorbonne); Michel Grabisch (Centre d'Economie de la Sorbonne)
    Abstract: In the classical setting of cooperative game theory, it is always assumed that all coalitions are feasible. However in many real situations, there are restrictions on the set of coalitions, for example duo to communication, order or hierarchy on the set of players, etc. There are already many works dealing with games on restricted set of coalitions, defining many different structures for the set of feasible coalitions, called set systems. We propose in this paper to consider k-regular set systems, that is, set systems having all maximal chains of the same length k. This is somehow related to communication graphs. We study in this perspective the core of games defined on k-regular set systems. We show that the core may be unbounded and without vertices in some situations.
    Keywords: Cooperative game, feasible coalition, core.
    JEL: C71
    Date: 2009–09
  4. By: Karina Gallardo (School of Economic Sciences, Washington State University)
    Abstract: Prediction markets are becoming a widely used tool to predict outcomes as diverse as presidential election results, movie box office receipts, corporate earnings, and football scores. Prediction markets allow individuals to buy and sell, in an active market, contracts that pay money if an event occurs on or before a specified date. Probably the most well known prediction markets are the Iowa Electronic Markets, which are primarily used to forecast the outcomes of political elections. For example, people trade contracts that pay $1 if Candidate A wins and $0 if Candidate B wins. Participants in the market buy and sell the contracts depending on the expected success of each candidate. If the “going price” of the contract is $0.60, this indicates, under certain assumptions, a 60% chance that Candidate A will win the presidential election.
    Date: 2009–09

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