New Economics Papers
on Collective Decision-Making
Issue of 2010‒01‒16
eighteen papers chosen by

  1. A short step between democracy and dictatorship By Quesada, Antonio
  2. Parallel axiomatizations of majority and unanimity By Quesada, Antonio
  3. Tax Contracts and Elections By Hans Gersbach; Maik T. Schneider
  4. Electoral Rules, Political Competition and Fiscal Expenditures: Regression Discontinuity Evidence from Brazilian Municipalities By Chamon, Marcos; de Mello, João M. P.; Firpo, Sergio
  5. Voting with Feet: Community Choice in Social Dilemmas By Gürerk, Özgür; Irlenbusch, Bernd; Rockenbach, Bettina
  6. On the stability of a triplet of scoring rules By Mostapha Diss; Vincent Merlin
  7. Non-cooperative Bargaining and the Incomplete Information Core By Okada, Akira
  8. Long Term Changes in Voting Power and Control Structure following the Unification of Dual Class Shares By Yishay Yafeh; Beni Lauterbach
  9. Decision by majority and the right to vote By Quesada, Antonio
  10. Allocation by coercion By Quesada, Antonio
  11. A communication game on electoral platforms By Demange, Gabrielle; Van Der Straeten, Karine
  12. Budgetary Separation of Powers in the American States and the Tax Level: A Regression Discontinuity Design By Leandro M. De Magalhães; Lucas Ferrero
  13. Voting on Thresholds for Public Goods: Experimental Evidence By Julian Rauchdobler; Rupert Sausgruber; Jean-Robert Tyran
  14. Non-bossy Social Classification By Dinko Dimitrov; Clemens Puppe
  15. The Paradoxes of the Liberal Ethics of Non-interference By Marco Mariotti; Roberto Veneziani
  16. Simulating a Sequential Coalition Formation Process for the Climate Change Problem: First Come, but Second Served? By Michael Finus; Bianca Rundshagen; Johan Eyckmans
  17. Can lower tax rates be bought? Business rent-seeking and tax competition among U.S. states By Robert S. Chirinko; Daniel J. Wilson
  18. Off-the-peak preferences over government size By Francisco Mart’nez-Mora; M. Socorro Puy

  1. By: Quesada, Antonio
    Abstract: The majority rule and the hierarchically dictatorial rule are both characterized when preferences are defined over two alternatives. The majority rule is characterized in terms of seven axioms. The hierarchically dictatorial rule is characterized in terms of six of these seven axioms and the negation of the seventh, so each rule can be seen as obtained from the other by negating just one of the axioms. The pivotal axiom holds that, for societies with at least three members, the frequency with which indifference is the result of the preference aggregation must be smaller than the frequency with which one of the alternatives is declared preferred to the other.
    Keywords: Social welfare function; majority rule; dictatorship; axiomatic characterization; two alternatives.
    JEL: D71
    Date: 2009–12–19
  2. By: Quesada, Antonio
    Abstract: The relative majority rule and the unanimity rule are characterized for the case in which there are only two alternatives. The main axioms are motivated by a principle of binary representativeness: the aggregation of the preferences of n voters is the result of splitting the n voters into two groups, aggregating the preferences of the voters of each group, selecting for each group a representative that adopts the preference of the group, and finally aggregating the preferences of the two representatives. The two characterizations are shown to differ from each other in just one axiom, expressing strategyproofness (unanimity) or group strategyproofness (majority).
    Keywords: Social welfare function; relative majority rule; unanimity rule; representativeness; axiomatic characterization; two alternatives.
    JEL: D71
    Date: 2009–12–16
  3. By: Hans Gersbach (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland); Maik T. Schneider (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: In this paper we examine the impact of tax contracts as a novel institution on elections, policies, and welfare. We consider a political game in which three parties compete to form the government. Parties have policy preferences about the level of public-good provision and benefit from perks when in office. A government raises taxes for both purposes. We show that tax contracts yield moderate policies and lead to lower perks by avoiding the formation of grand coalitions in order to win government. Moreover, in polarized societies they unambigously improve the welfare of the median voter.
    Keywords: political contracts, elections, government formation, tax promise
    JEL: D72 D82 H55
    Date: 2009–12
  4. By: Chamon, Marcos (International Monetary Fund); de Mello, João M. P. (Pontifical Catholic University of Rio de Janeiro (PUC-Rio)); Firpo, Sergio (São Paulo School of Economics)
    Abstract: We exploit a discontinuity in Brazilian municipal election rules to investigate whether political competition has a causal impact on policy choices. In municipalities with less than 200,000 voters mayors are elected with a plurality of the vote. In municipalities with more than 200,000 voters a runoff election takes place among the top two candidates if neither achieves a majority of the votes. We show that the possibility of runoff increases political competition. We use the discontinuity as a source of exogenous variation to infer causality from political competition to fiscal policy. Our results suggest that political competition induces more investment and less current expenditures, particularly personnel expenditures. The impact of political competition is larger when incumbents can run for reelection, suggesting incentives matter insofar as incumbents can themselves remain in office.
    Keywords: electoral systems, political competition, regression discontinuity, fiscal expenditures
    JEL: H72 D72 C14 P1
    Date: 2009–12
  5. By: Gürerk, Özgür (University of Erfurt); Irlenbusch, Bernd (London School of Economics); Rockenbach, Bettina (University of Erfurt)
    Abstract: Economic and social interactions often take place in open communities but the dynamics of the community choice process and its impact on cooperation of its members are yet not well understood. We experimentally investigate community choice in social dilemmas. Participants repeatedly choose between a community with and an alternative without punishment opportunities. Within each community a social dilemma game is played. While the community with punishment grows over time and fully cooperates, the alternative becomes depopulated. We analyze the success of this "voting with feet" mechanism and find that endogenous self-selection is key while slow growth is less decisive.
    Keywords: cooperation, social dilemmas, community choice, punishment, voting with feet
    JEL: C72 C92 H41
    Date: 2009–12
  6. By: Mostapha Diss (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen); Vincent Merlin (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)
    Abstract: When choosing a voting rule to make subsequent decisions, the members of a committee may wish this rule to be self-selected when it is the object of a choice among a menu of different possible voting rules. Such concepts have recently been explored in Social Choice theory, and a menu of voting rule is said to be stable if it contains at least one self-selective voting rule at each profile of preferences on voting rules. We consider in this article the menu constituted by the three well-known scoring rules {Borda, Plurality, and Antiplurality}. Under the Impartial Culture assumption, which proposes an a priori model to estimate the likelihood of the profiles, we will derive a probability for the stability of this triplet of voting rules.
    Keywords: Self-selectivity ; Stability ; Instability ; Scoring rules ; Impartial Culture assumption
    Date: 2009–12–11
  7. By: Okada, Akira
    Abstract: We consider information transmission in the core of an exchange economy with incomplete information by non-cooperative bargaining theory. Reformulating the coalitional voting game by Serrano and Vohra [Information transmission in coalitional voting games, J. of Economic Theory (2007), 117-137] so that an informed agent proposes an allocation, we define a notion of the informational core. A coalition has an informational objection to the status-quo allocation if and only if there exists an equilibrium rejection in the coalitional voting game. We present a non-cooperative sequential bargaining game in which coalitional voting games are repeated, and prove that a refinement of a sequential equilibrium of the bargaining game necessarily yields an allocation in the informational core.
    Keywords: core, exchange economy, incomplete information, information transmission, non-cooperative bargaining
    JEL: C71 C72 D51 D82
    Date: 2009–12
  8. By: Yishay Yafeh (The Hebrew University); Beni Lauterbach (School of Business Administration, Bar-Ilan University)
    Abstract: We follow the evolution of ownership structure in a sample of 80 Israeli companies that unified their dual-class shares in the 1990s, and compare it with a control sample of firms that maintained their dual share structure at least until 2000. Our main findings are as follows. First, controlling shareholders offset the dilution of voting rights they incurred upon unification by: 1) increasing their holdings prior to the unification (ex-ante preparation), and 2) by buying shares afterwards; by the end of the sample period their voting power was only marginally lower than in the control sample. This suggests that marginal voting rights are important to controlling shareholders even beyond the 50% threshold. Second, share unifications were not associated with much change in the identity of controlling shareholders. Third, the proportion of firms affiliated with pyramidal business groups in the sample of unifying firms was lower than in the population of listed firms as a whole and not different from that in the control sample, suggesting that pyramidal ownership structures did not replace dual class shares. Finally, unifying firms did not exhibit a substantial improvement in their performance and valuation in comparison with the control sample. We conclude that the regulatory attempt to enforce one share-one vote yielded, at best, a minor improvement in corporate governance.
    Keywords: Dual class shares, corporate governance
    JEL: G30 G32
    Date: 2009–12
  9. By: Quesada, Antonio
    Abstract: The (relative) majority rule is a benchmark collective decision norm. This paper provides a simple characterization of the majority rule, for the two-alternative case, that relies on the following property: the choice prescribed by the rule to a group I of individuals must be the one that would be prescribed in at least 50% of the strict subgroups that can be formed in I. This property means if some subgroup is denied the right to participate in the collective decision, the most likely event is that the exclusion of the subgroup will have no effect on the decision.
    Keywords: Social welfare function; majority rule; axiomatic characterization; two alternatives; manipulation.
    JEL: D71
    Date: 2009–12–17
  10. By: Quesada, Antonio
    Abstract: The problem of allocating indivisible goods is considered when groups of individuals can make use of their power to plunder other groups. A monarch in a group of individuals is an individual who always obtains one of his most preferred goods. A Paretian condition together with a requirement of robust stability lead to the existence of monarchs in all subsets of individuals, except possibly one.
    Keywords: Allocation rule; dictator; indivisible good; power; coalition formation.
    JEL: D71 D61 D85
    Date: 2009–11–30
  11. By: Demange, Gabrielle (Paris School of Economics (EHESS)); Van Der Straeten, Karine (Toulouse School of Economics)
    Abstract: This paper proposes a game to study strategic communication on platforms by parties. Parties’ platforms have been chosen in a multidimensional policy space, but are imperfectly known by voters. Parties strategically decide the emphasis they put on the various issues, and thus the precision of the information they convey to voters on their position on each issue. The questions we address are the following: what are the equilibria of this communication game? How many issues will they address? Will parties talk about the same issues or not? Will they talk on issues that they "own" or not?
    JEL: C70 D70
    Date: 2009–11–23
  12. By: Leandro M. De Magalhães; Lucas Ferrero
    Abstract: Should the Federal government and the remaining American states adopt the line item veto? What are its effects? We use regression discontinuity design to claim that in states with the line item veto, divided government has a causal negative effect on the tax level. By investigating a panel of 38 American states from 1960 to 2006, we estimate a significant discontinuous increase of 13% in the tax level as the party affiliated with the Governor in the state Legislature switches from being the minority party to being the majority. In the nine states that have block veto, we find no significant discontinuity in the tax level. We also find little evidence to suggest that the partisan identity of the majority party in the Legislature has a causal effect on the state tax level.
    Keywords: Separation of powers, line item veto, tax level, regression discontinuity, nonparametric
    JEL: H00 H11 H20 H30 H71
    Date: 2009–10
  13. By: Julian Rauchdobler (Department of Public Economics, University of Innsbruck); Rupert Sausgruber (Department of Public Economics, University of Innsbruck); Jean-Robert Tyran (Department of Economics, University of Copenhagen)
    Abstract: Introducing a threshold in the sense of a minimal project size transforms a public goods game with an inefficient equilibrium into a coordination game with a set of Pareto-superior equilibria. Thresholds may therefore improve efficiency in the voluntary provision of public goods. In our one-shot experiment, we find that coordination often fails and exogenously imposed thresholds are ineffective at best and often counter-productive. This holds under a range of threshold levels and refund rates. We test if thresholds perform better if they are endogenously chosen, i.e. if a threshold is approved in a referendum, because voting may facilitate coordination due to signaling and commitment effects. We find that voting does have signaling and commitment effects but they are not strong enough to significantly improve the efficiency of thresholds.
    Keywords: provision of public goods; threshold; voting; experiments
    JEL: H41 D72 C92
    Date: 2009–12
  14. By: Dinko Dimitrov (University of Munich); Clemens Puppe (Karlsruhe Institute of Technology)
    Abstract: We consider the problem of how societies should be partitioned into classes if individuals express their views about who should be put with whom in the same class. A non-bossiness condition makes the social aggregator dependent only on those cells of the individual partitions the society members classify themselves in. This information is used to construct for each profile of views an opinion graph. By means of natural sovereignty and liberalism requirements, we characterize the non-bossy aggregators generating partitions in which the social classes are refinements of the connected components in the opinion graph.
    Keywords: Social Aggregation, Group Identity, Liberalism, Non-bossiness
    JEL: D71
    Date: 2009–11
  15. By: Marco Mariotti (University of St Andrews); Roberto Veneziani (Queen Mary, University of London)
    Abstract: We analyse the liberal ethics of non-interference applied to social choice. Two liberal principles capturing non-interfering views of society, inspired by J.S. Mill's conception of liberty are examined, which capture the idea that society should not penalise agents after changes in their situation that do not affect others. Two paradoxes of liberal approaches are highlighted. First, it is shown that a restricted view of non-interference, as reflected in the Individual Damage Principle, together with some standard axioms in social choice leads straight to welfare egalitarianism. Second, it is proved that every weakly paretian social welfare ordering that satisfies a general principle of noninterference must be dictatorial. Both paradoxes raise important issues for liberal approaches in social choice and political philosophy.
    Keywords: Liberalism, Noninterference, Equality, Impossibility
    JEL: D63
    Date: 2009–12
  16. By: Michael Finus (University of Stirling); Bianca Rundshagen (University of Hagen); Johan Eyckmans (atholieke Universiteit Leuven, Centrum voor Economische Studiën and Hogeschool-Universiteit Brussels)
    Abstract: We analyze stability of self-enforcing climate agreements based on a data set generated by the CLIMNEG world simulation model (CWSM), version 1.2. We consider two new aspects which appear important in actual treaty-making. First, we consider a sequential coalition formation process where players can make proposals which are either accepted or countered by other proposals. Second, we analyze whether a moderator, like an international organization, even without enforcement power, can improve upon globally suboptimal outcomes through coordinating actions by making recommendations that must be Pareto-improving to all parties. We discuss the conceptual difficulties of implementing our algorithm.
    Keywords: International Climate Agreements, Sequential Coalition Formation, Coordination through Moderator, Integrated Assessment Model, Algorithm for Computations
    JEL: C79 H87 Q54
    Date: 2009–12
  17. By: Robert S. Chirinko; Daniel J. Wilson
    Abstract: The standard model of strategic tax competition – the non-cooperative tax-setting behavior of jurisdictions competing for a mobile capital tax base – assumes that government policymakers are perfectly benevolent, acting solely to maximize the utility of the representative resident in their jurisdiction. We depart from this assumption by allowing for the possibility that policymakers, given the political and electoral environments in which they operate, also may be influenced by the rent-seeking (lobbying) behavior of businesses. Firms recognize the factors affecting policymakers’ welfare and may make campaign contributions to influence tax policy. These changes to the standard strategic tax competition model imply that business contributions affect not only the levels of equilibrium tax rates but also the slope of the tax reaction function between jurisdictions. Thus, business campaign contributions may affect tax competition and enhance or retard the mobility of capital across jurisdictions. ; Based on a panel of 48 U.S. states and unique data on business campaign contributions, our empirical work uncovers four key results. First, we document a significant direct effect of business contributions on tax policy. Second, the economic value of a $1 business campaign contribution in terms of lower state corporate taxes is nearly $4. Third, the slope of the reaction function between tax policy in a given state and the tax policies of its competitive states is negative. Fourth, we highlight the sensitivity of the empirical results to state effects.
    Keywords: Taxation
    Date: 2009
  18. By: Francisco Mart’nez-Mora (University of Leicester); M. Socorro Puy (Department of Economic Theory, Universidad de M‡laga)
    Abstract: In this paper, we analyze the political consequences derived from policy preferences which are non-symmetric around the peak. While the assumption of symmetric preferences is innocuous in political equi- libria with platforms convergence, it is not neutral when candidates are differentiated. Following the citizen-candidate approach, we show that a larger government size emerges when preferences of the me- dian voter off-the-peak are more intense towards overprovision (what we call wasteful preferences), whereas a smaller government results when her preferences are more intense towards underprovision (what we call scrooge preferences). We next study the determinants of the shape of preferences off-the-peak and find that: (i) A positive sign of the third derivative of the policy-induced utility function indicates wasteful preferences, while a negative sign indicates scrooge prefer- ences. (ii) The analog of KimballÕs coefficient of prudence (which is closely related to Arrow-PrattÕs coefficient of risk aversion), can be used to measure degrees of wastefulness and scroogeness. (iii) Sym- metric preferences require imposing quite stringent restrictions on the policy problem. Numerical examples illustrate the discrepancies de- rived from symmetric preferences versus scrooge preferences in terms of equilibrium predictions.
    Keywords: Single-peaked preferences, citizen-candidate, coefficient of prudence, differentiated platforms, risk-aversion
    JEL: D72 H31 H5
    Date: 2009–12

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