New Economics Papers
on Collective Decision-Making
Issue of 2013‒05‒19
thirteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Local politics and economic geography By Berliant, Marcus; Tabuchi, Takatoshi
  2. The Elimination of Broker Voting in Director Elections By Ali Akyol; Konrad Raff; Patrick Verwijmeren
  3. Do More Powerful Interest Groups have a Disproportionate Influence on Policy? By Zara Sharif; Otto H. Swank
  4. Politics 2.0: The Multifaceted Effect of Broadband Internet on Political Participation By Filipe R. Campante; Ruben Durante; Francesco Sobbrio
  5. Providing negative cost public projects under a fair mechanism: An experimental analysis By Werner Güth; Anastasios Koukoumelis; M. Vittoria Levati; Matteo Ploner
  6. Judicial Error by Groups and Individuals By Frans van Dijk; Joep H. Sonnemans; Ed Bauw
  7. Networks and Collective Action By Ramon Flores; Maurice Koster; Ines Lindner; Elisenda Molina
  8. Democratic Values Transmission By Brañas Garza, Pablo; Espinosa Alejos, María Paz; Giritligil, Ayca E.
  9. The promise of transformation through participation: an analysis of Communal Councils in Caracas, Venezuela By Triviño Salazar, J.C.
  10. Share Functions for Cooperative Games with Levels Structure of Cooperation By Mikel Alvarez-Mozos; Rene van den Brink; Gerard van der Laan; Oriol Tejada
  11. What to put on and what to keep off the Table? A Politician's Choice of which Issues to address By Rei S. Sayag; Otto H. Swank
  12. Collective versus Decentralized Wage Bargaining and the Efficient Allocation of Resources By Xiaoming Cai; Pieter A. Gautier; Makoto Watanabe
  13. An experimental investigation of risk sharing and adverse selection By Potters J.A.M.; Tausch F.; Riedl A.M.

  1. 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. We show that full information equivalence holds at a stable equilibrium in only one of the three districts when transportation 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: D72 D82 R12
    Date: 2013–05–15
  2. By: Ali Akyol (University of Melbourne); Konrad Raff (VU University Amsterdam); Patrick Verwijmeren (VU University Amsterdam, Duisenberg school of finance, and University of Glasgow)
    Abstract: After pressure from shareholder activists, proxy advisory firms, and the New York Stock Exchange, the Securities and Exchange Commission has eliminated uninstructed broker voting in director elections. We observe that average director approval rates remain high after the change in regulation, while the probability of a director being voted off the board remains low. In addition, we find no evidence of significant wealth effects of the change in regulation. We do find that firms are increasingly letting shareholders ratify their auditors after the change in regulation, which helps in establishing a quorum.
    Keywords: Broker voting, shareholder empowerment, Securities and Exchange Commission, board effectiveness
    JEL: G34 G38
    Date: 2012–09–14
  3. By: Zara Sharif (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam)
    Abstract: Decisions-makers often rely on information supplied by interested parties. In practice, some parties have easier access to information than other parties. In this light, we examine whether more powerful parties have a disproportionate influence on decisions. We show that more powerful parties influence decisions with higher probability. However, in expected terms, decisions do not depend on the relative strength of interested parties. When parties have not provided information, decisions are biased towards the less powerful parties. Finally, we show that compelling parties to supply information destroys incentives to collect information.
    Keywords: information collection, communication, interest groups, decision-making
    JEL: D72 D78 D82 H39
    Date: 2012–12–05
  4. By: Filipe R. Campante; Ruben Durante; Francesco Sobbrio
    Abstract: We investigate the impact of the diffusion of high-speed Internet on different forms of political participation, using data from Italy. We exploit differences in the availability of ADSL broadband technology across municipalities, using the exogenous variation induced by the fact that the cost of providing ADSL-based Internet services in a given municipality depends on its relative position in the pre-existing voice telecommunications infrastructure. We first show that broadband Internet had a substantial negative effect on turnout in parliamentary elections between 1996 and 2008. However, we also find that it was positively associated with other forms of political participation, both online and offline: the emergence of local online grassroots protest movements, and turnout in national referenda (largely opposed by mainstream parties). We then show that the negative effect of Internet on turnout in parliamentary elections is essentially reversed after 2008, when the local grassroots movements coalesce into the Five-Star Movement (M5S) electoral list. Our findings are consistent with the view that: 1) the effect of Internet availability on political participation changes across different forms of engagement; 2) it also changes over time, as new political actors emerge who can take advantage of the new technology to tap into the existence of a disenchanted or demobilized contingent of voters; and 3) these new forms of mobilization eventually feed back into the mainstream electoral process, converting “exit” back into “voice”.
    JEL: D72 L82 L86
    Date: 2013–05
  5. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Anastasios Koukoumelis (Max Planck Institute of Economics, Strategic Interaction Group); M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group, and Department of Economics, University of Verona); Matteo Ploner (DECO-CEEL, University of Trento)
    Abstract: This paper experimentally examines a procedurally fair provision mech- anism allowing members of a small community to determine, via their bids, which of four alternative public projects to implement. Previous experi- ments with positive cost projects have demonstrated that the mechanism is efficiency enhancing. Our experiment tests whether the mechanism re- mains conducive to efficiency when negative cost, but less efficient, projects are made available. We find that this is not the case. On the other hand, we detect no significant difference in bid levels depending on whether mixed feelings are present or absent, and on whether the others' valuations are known or unknown.
    Keywords: Public projects, Bidding behavior, Procedural fairness, Experiment
    JEL: C72 C92 D63 H44
    Date: 2013–05–13
  6. By: Frans van Dijk (Netherlands Council for the judiciary); Joep H. Sonnemans (University of Amsterdam); Ed Bauw (University of Amsterdam, Netherlands Council for the judiciary)
    Abstract: In criminal cases judges evaluate and combine probabilistic evidence to reach verdicts. Unavoidably, errors are made, resulting in unwarranted conviction or acquittal of defendants. This paper addresses the questions (1) whether hearing cases by teams of three persons leads to less error than hearing cases alone; (2) whether deliberation leads to better decisions than mechanical aggregation of individual opinions; and (3) whether participating in deliberations improves future individual decisions. We find that having more than one judge consider cases reduces error effectively. This does not mean that it is necessary to deliberate about all cases. In simple cases many errors can be avoided by mechanical aggregation of independent opinions, and deliberation has no added value. In difficult cases discussion leads to less error. The advantage of deliberation goes beyond the case at hand: although we provide no feedback about the quality of verdicts, it improves individual decisions in subsequent cases.
    Keywords: judicial decision making, experiment, law and economics
    JEL: C91 C92 K14
    Date: 2012–03–27
  7. By: Ramon Flores (Universidad Carlos III de Madrid); Maurice Koster (University of Amsterdam); Ines Lindner (VU University Amsterdam); Elisenda Molina (Universidad Carlos III de Madrid)
    Abstract: This paper proposes a new measure for a group's ability to lead society to adopt their standard of behavior, which in particular takes account of the time the group takes to convince the whole society to adopt their position. This notion of a group's power to initiate action is computed as the reciprocal of the resistance against it, which is in turn given by the expected absorption time of a related finite state partial Markov chain that captures the social dynamics. The measure is applicable and meaningful in a variety of models where interaction between agents is formalized through (weighted) binary relations. Using Percolation Theory, it is shown that the group power is monotonic as a function of groups of agents. We also explain the differences between our measure and those discussed in the literature on Graph Theory, and illustrate all these concerns by a thorough analysis of two particular cases: the Wolfe Primate Data and the 11S hijackers' network.
    Keywords: Collective action, Social networks, Influence and diffusion models, Network intervention, Group centrality measures
    JEL: C79 D01 D71
    Date: 2012–03–29
  8. By: Brañas Garza, Pablo; Espinosa Alejos, María Paz; Giritligil, Ayca E.
    Abstract: This study addresses the issue of intergenerational transmission of democratic values embedded in social choice rules. We focus on a few rules which have been the focus of social choice theory: plurality, plurality with a runoff, majoritarian compromise, social compromise and Borda rule. We confront subjects with preferences profiles of a hypothetical electorate over a set of four alternatives. Different rules produce different outcomes and subjects decide which alternative should be chosen for the society whose preference profile is shown. We elicit each subject's preferences over rules and his/her parents' and check whether there is any relationship; 186 students and their parents attended the sessions at Istanbul Bilgi University. Overall, we find support for the hypothesis of parental transmission of democratic values and gender differences in the transmitted rule.
    Keywords: experiments, political transmission, democratic values, social choice
    JEL: D71 D72 C90
    Date: 2013
  9. By: Triviño Salazar, J.C.
    Abstract: Communal Councils (CCs) in Venezuela are deemed as part of a greater project of social transformation under a radical approach to participatory democracy. The Hugo Chavez’s administration endorsed the creation of thousands of allegedly self-governing CCs in every neighbourhood of every city or town in the country. The initial goal was to address people’s most urgent needs while including them in the decision-making process in their communities. The passing of President Chavez, a charismatic leader who was the driving force behind Chavismo and the Bolivarian Revolution, represents a challenge to the participatory process where CCs have been framed. Within this overall context, a radical approach to participation should lay the foundations of a State-led process of social transformation of the left. Based on this, the objectives of this paper are: on the one hand, to propose a set of indicators to study spaces of participation at the community level framed in a State-led process of social transformation; on the other, to show the viability of these indicators in the analysis of Communal Councils in the context of the Bolivarian Revolution in Venezuela. These indicators refer to the recognition of ‘the other’; autonomy from state institutions; mobilization of the community; and design and internal dynamics. In order to advance these objectives, this paper explores how participation in the CCs has been operationalized under the Bolivarian Revolution. Therefore, this research has empirically implemented the proposed indicators in six CCs of Caracas through semi-structure interviews with community leaders. The results suggest that the type of participation offered is one strongly conditioned by an ideological system which promises transformation but impedes this transformation in practice. I have called this situation a ‘conditioned participation’.
    Keywords: community;Bolivarian Revolution;Communal Councils;participatory democracy;radical democracy;spaces of participation
    Date: 2013–04–24
  10. By: Mikel Alvarez-Mozos (University of Santiago de Compostela); Rene van den Brink (VU University Amsterdam); Gerard van der Laan (VU University Amsterdam); Oriol Tejada (ETH Zuerich)
    Abstract: In a standard TU-game it is assumed that every subset of the player set can form a coalition and earn its worth. One of the first models where restrictions in cooperation are considered is the one of games with coalition structure. In such games the player set is partitioned into unions and players can only cooperate within their own union. Owen introduced a value for games with coalition structure under the assumption that also the unions can cooperate among them. Winter extended this value to games with levels structure of cooperation, which consists of a game and a finite sequence of partitions defined on the player set, each of them being coarser than the previous one. A share function for TU-games is a type of solution that assigns to every game a vector whose components add up to one, and thus they can be interpreted as players' shares in the worth to be allocated. Extending the approach to games with coalition structure developed by van den Brink and van der Laan (2005), we introduce a class of share functions for games with levels structure of cooperation by defining, for each player and each level, a standard TU-game. The share given to each player is then defined as the product of her shares in the games at every level. We show several desirable properties and provide axiomatic characterizations of this class of LS-share functions.
    Keywords: cooperative game, Shapley value, coalition structure, share functions, levels structure of cooperation
    JEL: C71
    Date: 2012–05–11
  11. By: Rei S. Sayag (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam)
    Abstract: At the start of their term, politicians often announce which issue they intend to address. To shed light on this agenda setting, we develop a model in which a politician has to decide whether or not to address a public issue. Addressing an issue means that the politician investigates the issue and next chooses for either a major reform or a minor reform. Not addressing an issue means that the status quo is maintained. Politicians differ in their ability to make correct decisions. They want to make good decisions and want to come across as able decision makers. An important characteristic of the model is that politicians and voters have different priors concerning the desirability of a major reform. We show that electoral concerns may lead to anti-pandering. Politicians tend to put issues on their political agenda when voters are relatively pessimistic about a major reform, and keep issues off the table when voters are optimistic about major reform.
    Keywords: Agenda Setting, Career concerns, Pandering
    JEL: D72 D78 D82 P16
    Date: 2012–11–27
  12. By: Xiaoming Cai (VU University Amsterdam); Pieter A. Gautier (VU University Amsterdam); Makoto Watanabe (VU University Amsterdam)
    Abstract: An advantage of collective wage agreement is that search and business-stealing externalities can be internalized. A disadvantage is that it takes more time before an optimal allocation is reached because more productive firms (for a particular worker type) can no longer signal this by posting higher wages. Specifically, we consider a search model with two sided heterogeneity and on-the-job search. We compare the most favorable case of a collective wage agreement (i.e. the wage that a planner would choose under the constraint that all firms in a sector-ocupation cell must offer the same wage) with the case without collective wage agreement. We find that collective wage agreements are never desirable if firms can commit ex ante to a wage and only desirable if firms cannot commit and the relative efficiency of on the job search to off- the job search is less than 20%. This result is hardly sensitive to the bargaining power of workers. Empirically we find both for the Netherlands and the US that this value is closer to 50%.
    Keywords: Collective wage agreements, on-the-job search, efficiency
    JEL: E24 J62 J63 J64
    Date: 2012–08–28
  13. By: Potters J.A.M.; Tausch F.; Riedl A.M. (GSBE)
    Abstract: Does adverse selection hamper the effectiveness of voluntary risk sharing? How do differences in risk profiles affect adverse selection? We experimentally investigate individuals' willingness to share risks with others. Across treatments we vary how risk profiles differ between individuals. We find strong evidence for adverse selection if individuals risk profiles can be ranked according to first-order stochastic dominance and only little evidence for adverse selection if risk profiles can only be ranked on the basis of second-order stochastic dominance. We observe the same pattern also for anticipated adverse selection. These results suggest that the degree to which adverse selection erodes voluntary risk sharing arrangements crucially depends on the form of risk heterogeneity.
    Keywords: Criteria for Decision-Making under Risk and Uncertainty;
    Date: 2013

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