New Economics Papers
on Collective Decision-Making
Issue of 2011‒11‒28
five papers chosen by

  1. Arrow’s Impossibility Theorem and the distinction between Voting and Deciding By Colignatus, Thomas
  2. Larger groups may alleviate collective action problems By Sung-Ha Hwang
  3. Variational Bewley Preferences By Faro, José Heleno
  4. Collusion in board of directors By Bourjade, Sylvain; Germain, Laurent
  5. A Mechanism Design Approach to Climate Agreements By Martimort, David; Sand-Zantman, Wilfried

  1. By: Colignatus, Thomas
    Abstract: Arrow’s Impossibility Theorem in social choice finds different interpretations. Bordes-Tideman (1991) and Tideman (2006) suggest that collective rationality would be an illusion and that practical voting procedures do not tend to require completeness or transitivity. Colignatus (1990 and 2011) makes the distinction between voting and deciding. A voting field arises when pairwise comparisons are made without an overall winner, like in chess or basketball matches. Such (complete) comparisons can form cycles that need not be transitive. When transitivity is imposed then a decision is made who is the best. A cycle or deadlock may turn into indifference, that can be resolved by a tie-breaking rule. Since the objective behind a voting process is to determine a winner, then it is part of the very definition of collective rationality that there is completeness and transitivity, and then the voting field is extended with a decision.
    Keywords: economic crisis; voting theory; democracy; economics and mathematics;
    JEL: D71 A10 P16
    Date: 2011–11–21
  2. By: Sung-Ha Hwang (Department of Economics, Sogang University, Seoul)
    Abstract: This paper shows how larger group size can enhance punishing behavior in social dilemmas and hence support higher levels of cooperation. This occurs when agents can punish fellow group members who violate cooperative norms. Unlike existing approaches that focus on decentralized punishment, I view punishment to be a collective activity and show that pun- ishers can ?divide and conquer?defectors more e¢´ectively as the size of the group increases. To describe the punishment activities more precisely I develop a con?ict model which gener- alizes Lanchester?s equations - equations which describe the time evolution of the strengths of two competing armies.
    Keywords: Collective action, group size, collective punishment, Lanchester?s equation
    JEL: H41 D74
    Date: 2011
  3. By: Faro, José Heleno
    Date: 2011–10
  4. By: Bourjade, Sylvain; Germain, Laurent
    Abstract: The aim of this paper is to study what is the best structure of a Board of Directors when collusive aspects between the Board and the CEO are taken into account. We analyze how shareholders should select the members of the Board in a framework with asymmetric information and uncertainty about the optimal projects for the firm. In particular, we examine the optimal degree of independence of the Board from a shareholders perspective. This allows us to state when it is beneficial for shareholders to have an insider-oriented board or an outsider oriented board with a majority of independent directors when collusion is a major threat.
    Keywords: Collusion; Corporate Governance; Asymmetric Information; Uncertainty
    JEL: D81 G34 D82
    Date: 2011
  5. By: Martimort, David; Sand-Zantman, Wilfried
    Abstract: We analyze environmental agreements in contexts with asymmetric information, voluntary participation by sovereign countries and possibly limited enforcement. Taking a mechanism design perspective, we study how countries can agree on effort levels and compensations to take into account multilateral externalities. We delineate conditions for efficient agreements and trace out possible inefficiencies to the conjectures that countries hold following disagreement. We show how optimal mechanisms admit simple approximations with attractive implementation properties. Finally, we also highlight how limits on commitment strongly hinder performances of optimal mechanisms.
    JEL: D82
    Date: 2011–08–31

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