New Economics Papers
on Collective Decision-Making
Issue of 2013‒06‒04
twenty papers chosen by
Stan C. Weeber, McNeese State University

  1. Knowledge is power - A theory of information, income, and welfare spending By Jo Thori Lind; Dominic Rohner
  2. Large elections with multiple alternatives: a Condorcet Jury Theorem and inefficient equilibria By GOERTZ, Johanna; MANIQUET, François
  3. Behavioral biases and long term care insurance: A political economy approach By DE DONDER, Philippe; LEROUX, Marie-Louise
  4. Democracy and Regulation: The Effects of Electoral Competition on Infrastructure Investments By Arthur Schram; Aljaz Ule
  5. Fertilizer Subsidies and Voting Patterns: Political Economy Dimensions of Input Subsidy Programs By Mason, Nicole M.; Jayne, T.S.; Walle, Nicolas van de
  6. Do Lawyer-Legislators Protect Their Business? Evidence from Voting Behavior on Tort Reforms By Ulrich Matter; Alois Stutzer
  7. Strategic transparency and electoral pressure By Moretti, Laura; Suzuki, Toru
  8. Simple Centrifugal Incentives in Downsian Dynamics By Laussel, Didier; Le Breton, Michel; Xefteris, Dimitrios
  9. Using Preferred Outcome Distributions to estimate Value and Probability Weighting Functions in Decisions under Risk By Bas Donkers; Carlos J.S. Lourenco; Benedict G.C. Dellaert; Daniel G. Goldstein
  10. Uncertainty and the Politics of Employment Protection By Andrea Vindigni; Simone Scotti; Cristina Tealdi
  11. Surprising Gifts - Theory and Laboratory Evidence By Kiryl Khalmetski; Axel Ockenfels; Peter Werner
  12. Institutions, competition and regulation: Intellectual property and innovation By Tucker, C.E.
  13. Magic mirror on the wall, who in the world is legitimate after all? Legitimacy claims of international institutions By Biegoń, Dominika; Gronau, Jennifer; Schmidtke, Henning
  14. The emergence of democracy: a behavioural perspective By Kyriazis, Nicholas; Metaxas, Theodore
  15. Shared Perceptions of Green? The perception and acceptance of European Union values and rules in environmental policy in Jordan By Gerau, Jasmin
  16. Global Development Goal Setting as a Policy Tool for Global Governance: Intended and Unintended Consequences By Sakiko Fukuda-Parr
  17. Towards autonomous decision-making: A probabilistic model for learning multi-user preferences By Peters, M.; Ketter, W.
  18. Semi-bounded Rationality: A model for decision making By Tshilidzi Marwala
  19. Global R&D network. A network analysis of international R&D centres. By Giuditta De Prato; Daniel Nepelski
  20. Global Goals as a Policy Tool: Intended and Unintended Consequences By Sakiko Fukuda-Parr

  1. By: Jo Thori Lind; Dominic Rohner
    Abstract: No voters cast their votes based on perfect information, but richer voters are on average best informed. We develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters, and cause parties to choose political platforms that are better aligned with the preferences of rich voters. In US election survey data, income is more important in affecting voting behavior for more informed voters than for less informed voters. Further, when there is a strong correlation between income and political information, Congress representatives vote more conservatively, which is also in line with our theory.
    Keywords: Redistribution; Welfare Spending; Information; Income; Voting; Political Economics
    JEL: D31 D72 D82 H53
    Date: 2013–04
  2. By: GOERTZ, Johanna (University of Guelph, Canada & Université catholique de Louvain, CORE, Belgium); MANIQUET, François (Université catholique de Louvain, CORE, Belgium)
    Abstract: We investigate whether the plurality rule aggregates information efficiently in large elections with multiple alternatives, in which voters have common interests. Voters’ preferences depend on an unknown state of nature, and they receive imprecise private signals about the state of nature prior to the election. Similar to two-alternative elections (e.g., Myer- son (1998)), there always exists an informationally efficient equilibrium in which the correct alternative is elected. However, we identify new types of coordination failures in elections with more than two alternatives that lead to new types of inefficient equilibria. These can have interesting new properties: Voters may vote informatively, but the correct alternative is not elected.
    Keywords: efficient information aggregation, simple plurality rule, Poisson games, Condorcet Jury Theorem
    JEL: C72 D71 D72 D82
    Date: 2013–05–22
  3. By: DE DONDER, Philippe (Toulouse School of Economics (GREMAQ-CNRS and IDEI), France); LEROUX, Marie-Louise (UQAM, Canada; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)
    Abstract: We develop a model where individuals all have the same probability of becoming dependent and vote over the social long term care insurance contribution rate before buying additional private insurance and saving. We study three types of behavioral biases, all having in common that agents under-weight their dependency probability when taking private decisions. Sophisticated procrastinators anticipate their mistake when voting, while optimistic and myopic agents have preferences that are consistent across choices. Optimists under-estimate their own probability of becoming dependent but know the average probability while myopics underestimate both. Sophisticated procrastinators attain the first-best allocation while myopics and optimists insure too little and save too much. Myopics and optimists more (resp., less) biased than the median are worse off (resp., better off), at the majority voting equilibrium, when private insurance is available than when it is not.
    Keywords: majority voting, myopia, optimism, sophisticated procrastinators, complementary private insurance, dependency linked annuity
    JEL: H55 D91
    Date: 2013–05–17
  4. By: Arthur Schram (University of Amsterdam); Aljaz Ule (University of Amsterdam)
    Abstract: This paper investigates infrastructure investment in markets where regulation is subject to varying degrees of manipulation by elected politicians. Based on a model of price regulation in a market with increasing demand and long-term returns on investment we construct a multi-period game between a service provider, consumers with voting rights and elected decision makers. In each period the consumers elect a decision maker who may then regulate the price for service provision. Before an election the service provider chooses whether to increase its capacity. Investment is irreversible and profitable only with a sufficiently high price. We derive the subgame perfect equilibrium for this game and investigate the price and investment dynamics through an experiment with human subjects. The experimental results show that service providers invest when decision-makers' interests align with their own, though prices may rise inefficiently high when the regulatory framework is made independent of future political manipulation. Independency of regulation thus decreases efficiency and consumer surplus. In contrast, when decision-makers' interests do not align with service providers' we find efficiency only when regulation can be made independent from electoral dynamics.
    Keywords: Infrastructural investment, regulation, electoral competition, laboratory experiment
    JEL: L5 L43 D92 C9
    Date: 2013–03–18
  5. By: Mason, Nicole M.; Jayne, T.S.; Walle, Nicolas van de
    Abstract: Agricultural input subsidies often have implicit or explicit political economy objectives. Using panel data from Zambia, this article empirically tests whether election outcomes affect targeting of subsidized fertilizer and whether fertilizer subsidies win votes. Results suggest that the Zambian government allocated substantially more subsidized fertilizer to households in constituencies won by the ruling party in the last election, and more so the larger its margin of victory. However, past subsidized fertilizer allocations had no statistically significant effect on the share of votes won by the incumbent president. Rather, voters rewarded the incumbent for reductions in unemployment, poverty, and income inequality.
    Keywords: fertilizer subsidies, political economy, voting patterns, election outcomes, fractional response, Zambia, sub-Saharan Africa, Agricultural and Food Policy, International Development, Political Economy, P16, D7, H2, H4, Q18,
    Date: 2013–05
  6. By: Ulrich Matter; Alois Stutzer (University of Basel)
    Abstract: <p style="margin-bottom:12.0pt; text-autospace:none"><span style="font-family:"Arial","sans-serif"">Attorneys elected to the US House of Representatives and to US state legislatures are systematically less likely to vote in favor of tort reforms that restrict tort litigation, but more likely to support bills that extend tort law. This finding is based on the analysis of 54 votes at the federal and state level between 1995 and 2012. It holds when controlling for legislators’ ideology and is particularly strong for term-limited lawyer-legislators. The empirical regularity is consistent with the hypothesis that lawyer-legislators, at least in part, pursue their business interests when voting on tort issues. Our results highlight the relevance of legislators’ identities and individual professional interests for economic policy making.</span>
    Keywords: Lawyers, legislatures, rent-seeking, tort law, tort reform, voting behavior
    JEL: D72 K13
    Date: 2013
  7. By: Moretti, Laura; Suzuki, Toru
    Abstract: This paper provides theory as well as empirical results for pre-averaging estimators of the daily quadratic variation of asset prices. We derive jump robust inference for pre-averaging estimators, corresponding feasible central limit theorems and an explicit test on serial dependence in microstructure noise. Using transaction data of different stocks traded at the NYSE, we analyze the estimators' sensitivity to the choice of the pre-averaging bandwidth and suggest an optimal interval length. Moreover, we investigate the dependence of pre-averaging based inference on the sampling scheme, the sampling frequency, microstructure noise properties as well as the occurrence of jumps. As a result of a detailed empirical study we provide guidance for optimal implementation of pre-averaging estimators and discuss potential pitfalls in practiceThis paper investigates how an office-motivated incumbent can use transparency enhancement on public spending to signal his budgetary management ability and win re-election. We show that when the incumbent faces a popular challenger, transparency policy can be an effective signaling device. A more popular challenger can reduce the probability to enhance transparency, while voters can be better off due to a more informative signaling. It is also shown that a higher level of public interest in fiscal issues can increase the probability of enhancing transparency, while voters can be worse off by a les informative signaling. --
    Keywords: Fiscal Transparency,Electoral Pressure,Signaling Game,Perfect Sequential Equilibrium
    JEL: D72 D82
    Date: 2012
  8. By: Laussel, Didier; Le Breton, Michel; Xefteris, Dimitrios
    Abstract: The main purpose of this short paper is to examine how traditional Downsian dynamics (convergence of the parties to the median of the distribution) are altered by the introduction of centrifugal incentives arising from the fact that any motion towards the center induces a lost of votes at the extremes of the electorate. Our analysis provides a new rationale for platform differentiation. It also yields new insights in the case when centripetal incentives are dominant on one side of the political spectrum while centrifugal incentives take over on the other side. This may apply for instance to the 2012 French elections.
    Keywords: Electoral Competition; Mixed equilibria; Centrifugal incentives
    JEL: D71 D72
    Date: 2013–05
  9. By: Bas Donkers (Erasmus University Rotterdam); Carlos J.S. Lourenco (Erasmus University Rotterdam); Benedict G.C. Dellaert (Erasmus University Rotterdam); Daniel G. Goldstein (Microsoft Research)
    Abstract: In this paper we propose the use of <I>preferred outcome</I> distributions as a new method to elicit individuals' value and probability weighting functions in decisions under risk. Extant approaches for the elicitation of these two key ingredients of individuals' risk attitude typically rely on a long, chained sequence of lottery choices. In contrast, preferred outcome distributions can be elicited through an intuitive graphical interface, and, as we show, the information contained in two preferred outcome distributions is sufficient to identify non-parametrically both the value function and the probability weighting function in rank-dependent utility models. To illustrate our method and its advantages, we run an incentive-compatible lab study in which participants use a simple graphical interface - the Distribution Builder (Goldstein et al. 2008) - to construct their preferred outcome distributions, subject to a budget constraint. Results show that estimates of the value function are in line with previous research but that probability weighting biases are diminished, thus favoring our proposed approach based on preferred outcome distributions.
    Keywords: Decision making, risk preference, distribution builder, rank dependent utility, preference elicitation, micro economics
    JEL: D81 D83 M39
    Date: 2013–05–08
  10. By: Andrea Vindigni; Simone Scotti; Cristina Tealdi
    Abstract: This paper investigates the social preferences over labor market exibility, in a general equilibrium model of dynamic labor demand. We demonstrate that how the economy responds to productivity shocks depends on the power of labor to extract rents and on the status quo level of the firing cost. In particular, we show that when the ring cost is initially relatively low, a transition to a rigid labor market is favored by all the employed workers with idiosyncratic productivity below some threshold value. Conversely, when the status quo level of the firing cost is relatively high, the preservation of a rigid labor market is favored by the employed with intermediate productivity, whereas all other workers favor more exibility. A more volatile environment, and a lower rate of productivity growth, i.e., "bad times," increase the political support for more labor market rigidity only where labor appropriates of relatively large rents. The coming of better economic conditions not necessarily favors the demise of high firing costs in rigid high-rents economies, because "good times" cut down the support for exibility among the least productive employed workers. The model described provides some new insights on the comparative dynamics of labor market institutions in the U.S. and in Europe over the last few decades, shedding some new light both on the reasons for the original build-up of "Eurosclerosis," and for its relative persistence until the present day.
    Keywords: employment protection, job creation and destruction, firing cost, idiosyncratic productivity, volatility, growth, political economy, voting, rents, status quo, path dependency, institutional divergence.
    JEL: D71 D72 E24 J41 J63 J65
    Date: 2013
  11. By: Kiryl Khalmetski; Axel Ockenfels; Peter Werner
    Abstract: People do not only feel guilt from not living up to others' expectations (Battigalli and Dufwenberg (2007)), but may also like to exceed them. We propose a model that generalizes the guilt aversion model to capture the possibility of positive surprises when making gifts. A model extension allows decision makers to care about others' attribution of intentions behind surprises. We test the model in two dictator game experiments. Experiment 1 shows a strong causal effect of recipients' expectations on dictators' transfers. Moreover, in line with our model, the correlation between transfers and expectations can be both, positive and negative, obscuring the effect in the aggregate. Experiment 2 shows that dictators care about what recipients know about the intentions behind surprises.
    Keywords: guilt aversion, surprise seeking, dictator game, consensus effect
    JEL: C91 D64
    Date: 2013–05–09
  12. By: Tucker, C.E. (Tilburg University, Tilburg Law and Economics Center)
    Date: 2012
  13. By: Biegoń, Dominika; Gronau, Jennifer; Schmidtke, Henning
    Abstract: The legitimacy of international institutions is a contested issue both in terms of concept formation and empirical evidence and attracts attention from across the political sciences. The present contribution posits a relational concept of legitimacy that includes self-justification of rulers on the one hand, and legitimacy beliefs of the ruled on the other hand. By taking a top-down perspective, our conceptual section explores an underdeveloped aspect in the field of legitimacy research. We posit that the analysis of political elites' self-legitimations can considerably contribute to our understanding of governing activities and provide a more thorough picture of legitimation processes. These practices play a key role in transforming mere power into popularly accepted, stable authority and have an essentially communicative nature. Hence, self-legitimations are amenable to discourse analysis. In this conjunction, the paper assumes that the media functions as a discursive battleground creating a space for positive or negative evaluations of political orders, including affirmative contributions of the representatives of challenged organizations themselves. The conceptual and theoretical link between legitimacy, self-legitimizing practices, and discourse analysis is further developed in the first section of the paper. Subsequently, our conceptualization of self-legitimizing practices is empirically exemplified. Our explorative study of self-legitimating statements of representatives of three major international institutions (EU, G8, and UN) in media discourses is based on a large qualitative data-set which analyzes legitimacy discourses in two high-quality newspapers in four Western democracies (GB, US, DE, and CH) over a period of ten years (1998-2007). Our empirical findings demonstrate that international institutions' formal representatives and member states actively take part in the process of legitimation. Hence, global governance arrangements are not only objects of legitimacy demands, but at the same time cultivators of their own legitimacy. -- Die Legitimität internationaler Institutionen stellt sowohl hinsichtlich der Konzeptualisierung als auch hinsichtlich empirischer Ergebnisse ein umstrittenes Thema dar. Dieser Beitrag stellt ein relationales Konzept von Legitimität vor, das Selbstrechtfertigungen von Herrschern genauso in den Blick nimmt wie den Legitimitätsglauben der Beherrschten. Die in diesem Papier vorgestellte top-down Perspektive auf Legitimationsprozesse beleuchtet einen unterentwickelten Aspekt in der bisherigen empirischen Legitimitätsforschung: Die Selbstlegitimationen politischer Eliten. Die Analyse derselben trägt zu einem besseren Verständnis von Herrschaftspraktiken bei und zeichnet ein genaueres Bild von Legitimationsprozessen. Durch ihre Selbstlegitimationen sind sie bemüht, die öffentlichen Bewertungen über die durch sie vertretenen Institutionen positiv zu beeinflussen. Selbstlegitimationen werden kommunikativ vermittelt und können deshalb diskursanalytisch untersucht werden. In diesem Kontext kommt Medien eine Schlüsselrolle zu. Sie stellen eine diskursive Arena dar, in der sowohl positive als auch negative Bewertungen politischer Ordnungen vorgenommen werden und in der die politischen Herrscher versuchen, sich zu rechtfertigen. Die konzeptionelle und theoretische Verbindung zwischen Legitimität, Selbstlegitimationen und Diskursanalyse wird im ersten Teil des Papiers entwickelt. Im zweiten Teil des Papiers wird unsere Konzeptualisierung von Selbstlegitimationen empirisch illustriert. Unsere explorative Studie von Selbstlegitimationen von Repräsentanten dreier internationaler Institutionen (EU,G8 und UN) im medialen Diskurs basiert auf einer großen qualitativen Datengrundlage, welche den Legitimitätsdiskurs in jeweils zwei Qualitätszeitungen in vier westlichen Demokratien (GB, US, DE und CH) über einen Zeitraum von zehn Jahren erfasst. Unsere empirischen Ergebnisse zeigen, dass internationale Institutionen nicht nur Adressaten von Legitimitätsforderungen sind, sondern durch Selbstlegitimationen aktiv zu ihrer eigenen Legitimierung beitragen.
    Date: 2013
  14. By: Kyriazis, Nicholas; Metaxas, Theodore
    Abstract: In the present essay we introduce in a model the concept of macroculture and the formation of new values within the particular macroculture that arose during the 8th to 4th century BC in Ancient Greece. We analyse the conditions and the context for the emergence of the heavy infantryman, the hoplite, and the new tactical formation, the phalanx, and the trireme warship. We apply the coordination and cooperation as behavioural mechanisms to the phalanx and the triremes to show how a specific set of new values emerged. Then, taking into account bounded rationality, as a second behavioural mechanism we analyse how these values were taken over from the military into the political field and thus were crucial for the emergence and development of democracy.
    Keywords: Macroculture, Coordination and Cooperation mechanisms, bounded rationality, phalanx and triremes, military and democratic values.
    JEL: B15 N4 N43
    Date: 2013
  15. By: Gerau, Jasmin
    Abstract: The European Union has presented itself as a leading actor in global environmental politics, exporting its values and rules not only into global environmental agreements but also promoting these in their relations with the neighbouring countries to the southern Mediterranean. Academic attention for the promotion and exportation of the EU model has been high and two central debates have emerged, the EU as a normative power and EU external governance which are, as the paper argues, based on the common notion of the EU exporting its model and therefore complementary. While many empirical studies on the concepts exist, the paper argues that an external perspective has been largely disregarded. The paper will therefore give an empirical assessment on how the notion of EU exporting its values and rules is perceived by the recipient country of Jordan.
    Keywords: Environmental policy; EU external governance; Normative Power Europe
    Date: 2012
  16. By: Sakiko Fukuda-Parr (The New School University, New York)
    Abstract: Global development goals have become increasingly used by the United Nations and the international community to promote priority global objectives. The Millennium Development Goals (MDGs) are the most prominent example of such goals, but many others have been set since the 1960s. Despite their prominence and proliferation, little has been written about the concept of global goals as a policy tool, their effectiveness, limitations and broader consequences. This paper explores global development goals as a policy tool, and the mechanisms by which they lead to both intended and unintended consequences in influencing international development strategies and action. It analyses the MDGs as an example to argue that global goals activate the power of numbers to create incentives for national governments and others to mobilise action and galvanise support for important objectives. But the powers of simplification, reification and abstraction lead to broader unintended consequences when the goals are misinterpreted as national planning targets and strategic agendas, and when they enter the language of development to redefine concepts such as development and poverty. (?)
    Keywords: Global Development Goal Setting as a Policy Tool for Global Governance: Intended and Unintended Consequences
    Date: 2013–04
  17. By: Peters, M.; Ketter, W.
    Abstract: Information systems have revolutionized the provisioning of decision-relevant information, and decision support tools have improved human decisions in many domains. Autonomous decision- making, on the other hand, remains hampered by systems’ inability to faithfully capture human preferences. We present a computational preference model that learns unobtrusively from lim- ited data by pooling observations across like-minded users. Our model quantifies the certainty of its own predictions as input to autonomous decision-making tasks, and it infers probabilistic segments based on user choices in the process. We evaluate our model on real-world preference data collected on a commercial crowdsourcing platform, and we find that it outperforms both individual and population-level estimates in terms of predictive accuracy and the informative- ness of its certainty estimates. Our work takes an important step toward systems that act autonomously on their users’ behalf.
    Keywords: preferences;software agents;assistive technologies;multi-task learning;autonomous decision-making
    Date: 2013–05–22
  18. By: Tshilidzi Marwala
    Abstract: In this paper the theory of semi-bounded rationality is proposed as an extension of the theory of bounded rationality. In particular, it is proposed that a decision making process involves two components and these are the correlation machine, which estimates missing values, and the causal machine, which relates the cause to the effect. Rational decision making involves using information which is almost always imperfect and incomplete as well as some intelligent machine which if it is a human being is inconsistent to make decisions. In the theory of bounded rationality this decision is made irrespective of the fact that the information to be used is incomplete and imperfect and the human brain is inconsistent and thus this decision that is to be made is taken within the bounds of these limitations. In the theory of semi-bounded rationality, signal processing is used to filter noise and outliers in the information and the correlation machine is applied to complete the missing information and artificial intelligence is used to make more consistent decisions.
    Date: 2013–05
  19. By: Giuditta De Prato (European Commission – JRC - IPTS); Daniel Nepelski (European Commission – JRC - IPTS)
    Abstract: A firm's decision to establish an R&D centre in a specific location creates externalities affecting other firms and, thus, a random distribution of location choices is unlikely. Expecting that the global distribution of R&D centres fulfils the criteria of a complex network, we apply social network analysis to study the locations of international R&D centres and the relationships between the countries owning and hosting them. We analyse the characteristics of the global R&D network and identify its core members. Further, we include network indices in an empirical analysis of the R&D internationalisation determinants. We find that a country's position in the network, which does not necessarily coincide with its geographical or cultural proximity to other countries, has a significant impact on the formation and intensity of R&D linkages between countries. We provide policy implications addressing the challenges emerging from the increasing internationalisation and network of R&D.
    Keywords: globalisation of innovation, location of R&D centres, network analysis, gravity model
    JEL: D8 O32 L23
    Date: 2012–06
  20. By: Sakiko Fukuda-Parr (The New School University, New York)
    Abstract: Despite the increasing use and influence of global goals, little has been written about goal setting as a particular type of policy instrument in global governance. According to the UN intellectual history project (jolly et al, 2009), goal setting originated in the 1960s and made a major contribution to shaping policy agendas and action. But how and whom does goal setting influence? Goals are set without control over the means of implementation. In an IPC-IG Working Paper, I use ideas from the Sociology of Numbers on ?indicators as a technology of governance? (Merry, 2009) to explore the mechanisms by which global goals create incentives for action and frame thinking, thereby exerting both intended and unintended influence on policy agendas. This One Pager highlights the key points. (?)
    Keywords: Global Goals as a Policy Tool: Intended and Unintended Consequences
    Date: 2013–04

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