nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2011‒01‒30
twelve papers chosen by
Roland Kirstein
Otto von Guericke University Magdeburg

  1. Mediocracy, Third Version By Andrea Mattozzi; Antonio Merlo
  2. Voting in Small Committees By Paolo Balduzzi; Clara Graziano; Annalisa Luporini
  3. Voting in Corporate Boards with Heterogeneous Preferences By Paolo Balduzzi; Clara Graziano; Annalisa Luporini
  4. Privately informed parties and policy divergence By Kikuchi, Kazuya
  5. Local politics and economic geography By Berliant, Marcus; Tabuchi, Takatoshi
  6. Direct Democracy, Political Delegation, and Responsibility Substitution By Carlo Prato; Bruno Strulovici
  7. The Organizational Architecture of the Asia–Pacific: Insights from the New Institutionalism By Haggard, Stephan
  8. Sincere Lobby Formation By Zudenkova, Galina
  9. Tenure in Office and Public Procurement By Decio Coviello; Stefano Gagliarducci
  10. A Political Theory of Populism By Daron Acemoglu; Georgy Egorov; Konstantin Sonin
  11. Decision costs in legislative bargaining: An experimental analysis By Luis Miller; Christoph Vanberg
  12. A Unified Approach to Strategy-Proofness for Single-Peaked Preferences By John A. Weymark

  1. By: Andrea Mattozzi (Divison of Humanities and Social Sciences, California Institute of Technology); Antonio Merlo (Department of Economics, University of Pennsylvania)
    Abstract: We study the recruitment of individuals in the political sector. We propose an equilibrium model of political recruitment by two political parties competing in an election. We show that political parties may deliberately choose to recruit only mediocre politicians, in spite of the fact that they could select better individuals. Furthermore, we show that this phenomenon is more likely to occur in proportional than in majoritarian electoral systems.
    Keywords: Politicians, parties, political recruitment, electoral systems, all-pay auctions.
    JEL: D72 D44 J45
    Date: 2010–04–01
  2. By: Paolo Balduzzi (Università Cattolica Milano); Clara Graziano (Università degli Studi di Udine); Annalisa Luporini (Università degli Studi di Firenze, Dipartimento di Scienze Economiche)
    Abstract: We analyze the voting behavior of a small committee that has to approve or reject a proposal whose return is uncertain. Members have heterogenous preferences: some members want to maximize the expected value while other members have a bias toward project approval and ignore their private information. We analyze different voting games when information is costless and communication is not possible, and we provide insights on the optimal composition of these committees. Our main result is that the presence of biased members can improve the voting outcome by simplifying the strategies of unbiased members. Thus, committees with heterogeneous members can function at least as well as homogeneous committees and in some cases they perform better. In particular, when value-maximizing members hold 51% of votes, the socially optimal equilibrium becomes unique.
    Keywords: Voting, Small committees.
    JEL: D71 D72
    Date: 2011
  3. By: Paolo Balduzzi (Università Cattolica Milano); Clara Graziano (Università degli Studi di Udine); Annalisa Luporini (Università degli Studi di Firenze, Dipartimento di Scienze Economiche)
    Abstract: We analyze the voting behavior of a board of directors that has to approve (or reject) an investment proposal with uncertain return. We consider three types of directors: insiders, who are biased toward acceptance of the project, independent outsiders who want to maximize the firm's profit and independent outsiders who care about their reputation. We show that the presence of members with heterogeneous preferences can be beneficial and that the partisan behavior of insiders can be used as a sort of coordinating device by uninformed outsiders. Provided that the size of the board is optimal, there is no gain from increasing the number of outsiders above the strict majority despite the fact that each outsider is informed with positive probability. Substituting profit-maximizing directors with directors concerned about their reputation is not an obstacle to profit maximization provided that an appropriate sequential voting protocol is followed. We also show that a proper board composition makes communication between directors irrelevant in the sense that the same outcome is obtained with and without communication. Finally, as information is costly, our model provides some suggestions on the optimal size of boards.
    Keywords: Board of directors, Voting, Corporate Governance
    JEL: G30 D71
    Date: 2011
  4. By: Kikuchi, Kazuya
    Abstract: This paper presents a Downsian model of political competition in which parties have incomplete but richer information than voters on policy effects. Each party can observe a private signal of the policy effects, while voters cannot. In this setting, voters infer the policy effects from the party platforms. In this political game with private information, we show that there exist weak perfect Bayesian equilibria (WPBEs) at which the parties play different strategies, and thus, announce different platforms even when their signals coincide. This result is in contrast with the conclusion of the Median Voter Theorem in the classical Downsian model. Our equilibrium analysis suggests similarity between the set of WPBEs in this model and the set of uniformly perfect equilibria of Harsanyi and Selten (1988) in the model with completely informed parties which we studied in a previous paper (Kikuchi, 2010).
    Date: 2011–01
  5. By: Berliant, Marcus; Tabuchi, Takatoshi
    Abstract: We consider information aggregation in national and local elections when voters are mobile and might sort themselves into local districts. Using a standard model of private information for voters in elections in combination with a New Economic Geography model, agglomeration occurs for economic reasons whereas voter stratification occurs due to political preferences. We compare a national election, where full information equivalence is attained, with local elections in a three district model. A stable equilibrium accounting for both the economic and political sectors is shown to exist. Restricting to an example, we show that full information equivalence holds in only one of the three districts when transport cost is low. The important comparative static is that full information equivalence is a casualty of free trade. When trade is more costly, people tend to agglomerate for economic reasons, resulting in full information equivalence in the political sector. Under free trade, people sort themselves into districts, most of which are polarized, resulting in no full information equivalence in these districts. We examine the implications of the model using data on corruption in the legislature of the state of Alabama and in the Japanese Diet.
    Keywords: information aggregation in elections; informative voting; new economic geography; local politics
    JEL: D82 D72 R12
    Date: 2011–01–13
  6. By: Carlo Prato; Bruno Strulovici
    Abstract: Can direct democracy provisions improve welfare over pure representative democracy? This paper studies how such provisions affect politicians’ incentives and selection. While direct democracy allows citizens to correct politicians’ mistakes, it also reduces the incentives of elected representatives to search for good policies. This responsibility substitution reduces citizens’ ability to screen competent politicians, when elections are the only means to address political agency problems. A lower cost of direct democracy induces a negative spiral on politicians incentives, which we characterize by a disincentive multiplier. As a consequence, introducing initiatives or lowering their cost can reduce voters’ expected utility. Moreover, when elections perform well in selecting politicians and provide incentives, this indirect welfare reducing effect is stronger.
    Keywords: Direct Democracy, Initiative, Referendum, Political Agency, Delegation JEL Classification Numbers: D72, D78, P16
    Date: 2010–12–09
  7. By: Haggard, Stephan (University of California, San Diego)
    Abstract: This paper surveys recent literature on the design of international institutions and applies the insights from it to the prospects for regional economic cooperation in the Asia-Pacific. The political and economic heterogeneity of the region has served the process of regional economic integration. But this heterogeneity has limited the extent of institutional development and contributed to well-known features of it, including a proliferation of competing institutions, consensus decision-making, "shallow" cooperation, and limited delegation to standing international secretariats. Changes in voting rules could, in principle, change these outcomes but are not likely to arise. Deepening cooperation will come, rather, from marginal changes in the extent of delegation. Several proposals are suggested about how this might occur, including more independent sources of information on regional trends, enhanced dispute settlement, and common projects that involve more extensive transfers from richer to poorer members.
    Keywords: international institutions; international law; regionalism; delegation; free trade areas; ASEAN; APEC; voting rules
    Date: 2011–01–01
  8. By: Zudenkova, Galina
    Abstract: This paper analyzes endogenous lobbying over a unidimensional policy issue. Individuals differ in policy preferences and decide either to join one of two opposite interest lobbies or not to take part in lobbying activities. Once formed, lobbies make contributions to the incumbent government in exchange for a policy favor as in a common-agency model. A "sincere-lobby-formation" condition for equilibrium is introduced: an individual joins a lobby if their gain from the policy change that this lobby might achieve exceeds a contribution fee. Thus, an equilibrium occurs only if no lobby member would prefer their lobby to cease to exist. I show the existence of an equilibrium with two organized lobbies. Individuals with more extreme preferences are more likely to join lobbying activities. I find that lobbying somewhat moderates the government's preferences, i.e., it shifts the final policy in favor of individuals who are initially disadvantaged by the government's pro- or anti-policy preferred position. Under a utilitarian government, however, lobbying does not affect the final policy, and political competition results in a socially optimal outcome.
    Keywords: Sincere lobby formation; common agency; endogenous lobbying.
    JEL: D72
    Date: 2010–05–01
  9. By: Decio Coviello (Faculty of Economics, University of Rome "Tor Vergata"); Stefano Gagliarducci (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: We investigate how the functioning of public procurement is affected by the time politicians have stayed in office. We match a data set on public procurement auctions by Italian municipalities to a data set on the politics of municipal governments. For each municipality, we relate the mayor’s tenure in office to several outcomes of the procurement process. The main result is that an increase in a mayor’s tenure (the number of terms in office) is associated with “worse” outcomes: fewer bidders per auction, a higher cost of procurement, and a higher probability that the winner is local and that the same firm is awarded repeated auctions. We make use of a quasi-experimental change in the electoral law (the introduction of a two-term limit) to argue that the correlation is in fact causal. Finally, we provide a simple theoretical model of repeated auctions in which these findings are consistent with time in office progressively leading to collusion between government officials and a few favored bidders.
    Keywords: Tenure in office, Procurement auctions, Public works, Term limit
    JEL: D44 D72 D73 H57 H70
    Date: 2010–12–21
  10. By: Daron Acemoglu; Georgy Egorov; Konstantin Sonin
    Date: 2011–01–17
  11. By: Luis Miller (Centre for Experimental Social Sciences, Nuffield College, University of Oxford); Christoph Vanberg (Department of Economics, University of Cambridge)
    Abstract: We conduct an experiment to assess the effects of different decision rules on the costs of decision making in a multilateral bargaining situation. Specifically, we compare the amount of costly delay observed in an experimental bargaining game under majority and unanimity rule. Our main finding is that individual subjects are more likely to reject offers under unanimity rule. This increased rejection rate, as well as the requirement that all subjects agree, leads to more costly delay. This result provides empirical support for a classic argument in favor of less-than-unanimity decision rules put forth by Buchanan and Tullock (1962).
    Keywords: Collective decision-making, Majority rule, Unanimity, Legislative bargaining, Experimental economics
    JEL: C78 C92 D71 D72
    Date: 2011–01
  12. By: John A. Weymark (Department of Economics, Vanderbilt University)
    Abstract: This article establishes versions of Moulin's [On strategy-proofness and single peakedness, Public Choice 35 (1980), 31--38] characterizations of various classes of strategy-proof social choice functions when the domain consists of all profiles of single-peaked preferences on an arbitrary subset of the real line. Two results are established that show that the median of 2n+1 numbers can be expressed using a combination of minimization and maximization operations applied to subsets of these numbers when either these subsets or the numbers themselves are restricted in a particular way. These results are used to show how Moulin's characterizations of generalized median social choice functions can be obtained as corollaries of his characterization of min-max social choice functions.
    Keywords: Generalized median social choice functions, Moulin, min-max rules, single-peaked preferences, strategy-proofness
    JEL: D71 D82
    Date: 2011–01

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