New Economics Papers
on Collective Decision-Making
Issue of 2013‒08‒10
seventeen papers chosen by
Stan C. Weeber, McNeese State University

  1. Expert Information and Majority Decisions. By Kohei Kawamura (University of Edinburgh) and Vasileios Vlaseros (University of Edinburgh)
  2. Optimal Voting Rules By Alex Gershkov; Benny Moldovanu; Xianwen Shi
  3. Are Elections Debt Brakes? Evidence from French Municipalities By Caseette, Aurélie; Farvaque, Etienne
  4. Does a work effort norm lead to more efficient taxation in majority voting? By Weinreich, Daniel
  5. Stochastic Asymmetric Blotto Games: Theory and Experimental Evidence By John Duffy; Alexander Matros
  6. The Power of Coalitions: Participation and Governance in California’s Public-Private Welfare State By Eaton, Charlie; Weir, Margaret
  7. Partially Honest Nash Implementation: A Full Characterization By Lombardi, Michele; Yoshihara, Naoki
  8. Are All Dictators Equal? The Selective Targeting of Democratic Sanctions against Authoritarian Regimes By Christian von Soest; Michael Wahman
  9. Fair tax evasion and majority voting over redistributive taxation By Weinreich, Daniel
  10. Cooperation in WTO's Tariff Waters By Alessandro Nicita; Marcelo Olarreaga; Peri Silva
  11. The Self-Image Signaling Roles of Voice in Decision-Making By Qiyan ONG; Yohanes Eko RIYANTO; Walter E. THESEIRA; Steven M. SHEFFRIN
  12. Decision time and steps of reasoning in a competitive market entry game By Florian Lindner
  13. Biosecurity Externalities and Indemnities for Infectious Animal Diseases By David A. Hennessy
  14. Public Health in an Age of Genomics By OECD
  15. R&D drivers and obstacles to innovation in the energy industry By Maria Teresa Costa-Campi; Néstor Duch-Brown; José García-Quevedo
  16. Environmental Regulation: Supported by Polluting Firms, but Opposed by Green Firms By Felix Munoz-Garcia; Sherzod Akhundjanov
  17. Contingent Democrats in Action: Organized Labor and Regime Change in the Republic of Niger By Sebastian Elischer

  1. By: Kohei Kawamura (University of Edinburgh) and Vasileios Vlaseros (University of Edinburgh)
    Abstract: This paper studies dichotomous majority voting in common interest committees where each member receives not only a private signal but also a public signal observed by all of them. The public signal represents, e.g. expert information presented to an entire committee and its quality is higher than that of each individual private signal. We identify two informative symmetric strategy equilibria, namely i) the mixed strategy equilibrium where each member randomizes between following the private and public signals should they disagree; and ii) the pure strategy equilibrium where they follow the public signal for certain. The former outperforms the latter. The presence of the public signal precludes the equilibrium where every member follows their own signal, which is an equilibrium in the absence of the public signal. The mixed strategy equilibrium in the presence of the public signal outperforms the sincere voting equilibrium without the public signal, but the latter may be more efficient than the pure strategy equilibrium in the presence of the public signal. We suggest that whether expert information improves committee decision making depends on equilibrium selection.
    Keywords: information aggregation, strategic voting, expert information
    JEL: D72 D82 D83
    Date: 2013–08–02
  2. By: Alex Gershkov; Benny Moldovanu; Xianwen Shi
    Abstract: We study dominant strategy incentive compatible (DIC) and deterministic mechanisms in a social choice setting with several alternatives. The agents are privately informed about their preferences, and have single-crossing utility functions. Monetary transfers are not feasible. We use an equivalence between deterministic, DIC mechanisms and generalized median voter schemes to construct the constrained-efficient, optimal mechanism for an utilitarian planner. Optimal schemes for other welfare criteria such as, say, a Rawlsian maximin can be analogously obtained.
    Keywords: Mechanism Design, Voting, Dominant Strategy, Utilitarian
    JEL: D82 D72 D71
    Date: 2013–08–07
  3. By: Caseette, Aurélie; Farvaque, Etienne
    Abstract: We show that voters are fiscal conservatives, although in the long run only: while the average (over the mandate) level of debt has a negative impact on the probability of reelection, pre-election debt accumulation by incumbents increases their probability of reelection. As the negative impact is larger the higher the debt level, it compensates the short run effect. Elections thus appear as a disciplining device, even if a weak one.
    Keywords: Debt, Elections, Municipalities, Political Business Cycle
    JEL: D72 H72 H74
    Date: 2013
  4. By: Weinreich, Daniel
    Abstract: This paper introduces a work effort norm into a three-type ability approach to optimal linear income taxation. According to this social norm type, individuals experience stigma when working more or less than the average. This leads to a smaller dispersion in labor supply. The individual work incentives then induce post-tax income inequality to rise. Based on this, it can be shown that the socially optimal tax rate is unambiguously increasing with the strength of the work effort norm. Turning to majority voting the tax rate preferred by the median voter could decrease when the work effort norm is introduced. We can show that the majority tax rate turns out to be inefficiently low or high. Beyond, for large preference parameters the difference between the first-best tax rate and the majority tax rate seems to diminish. Further, for specific wage distributions there seem to exist a preference strength which ensures efficient taxation. Subsequently, the work effort norm can reduce the inefficiency implemented by majority voting.
    Keywords: optimal income taxation, majority voting work effort norm, labor supply, redistribution
    JEL: D70 H21 H30
    Date: 2013–08
  5. By: John Duffy; Alexander Matros
    Abstract: We consider a model where two players compete for n items having different common values in a Blotto game. Players have to decide how to allocate their budgets across all n items. The winner of each item is determined stochastically using a lottery mechanism. We analyze two payoff objectives: (i) players aim to maximize their total expected payoff and (ii) players maximize the probability of winning a majority value of all n items. We develop some new theoretical results for the majority rule case and show that the majority rule objective results in qualitatively different equilibrium behavior than the total expected payoff objective. We report the results of an experiment where the two payoff mechanisms are compared and we find strong support for the theoretical predictions.
    Keywords: Colonel Blotto game, Contests, Resource Allocation, Lotteries, Electoral College, Game Theory, Political Theory, Experimental Economics
    JEL: C72 C73 C92 D72 D74
    Date: 2013–08
  6. By: Eaton, Charlie; Weir, Margaret
    Abstract: Between 1980 and 2010 California’s health care policy field shifted from a business-dominated, closed-door pattern of decision making to an open political arena in which a wide-ranging and diversely resourced coalition advocating on behalf of beneficiaries had become an accepted partner in policymaking. This article examines this transformation, considering its broader implications for the political dynamics of the public-private welfare state and the role of advocacy groups in defending beneficiary interests. Our argument emphasizes coalition-building, probing not just which interests combine forces, but also showing how coalitions can expand over time and build their range of capabilities. We focus on three processes that build effective coalitions to influence public private policymaking: 1) an initial link that joins previously unconnected groups in umbrella organizations; 2) resource expansion that enlarges the engaged base by funding more diverse groups and expanding alliances with those organizations; 3) institutionalization of coalitional engagement by changing the rules of the game using such policy levers as regular hearings, provisions for participation, and transparency. We conclude by showing how these capabilities have positioned California to implement the Affordable Care Act and consider the implications for other states.
    Keywords: Social and Behavioral Sciences
    Date: 2013–08–05
  7. By: Lombardi, Michele; Yoshihara, Naoki
    Abstract: Given the framework introduced by Dutta and Sen (2012), this paper offers a comprehensive analysis of (Nash) implementation with partially honest agents when there are three or more participants. First, it establishes a condition which is necessary and sufficient for implementation. Second, it provides simple tests for checking whether or not a social choice correspondence can be implemented. Their usefulness is shown by examining implementation in a wide variety of environments.
    Keywords: Implementation, Nash equilibrium, social choice correspondences, partial honesty, Condition μ
    JEL: C72 D71
    Date: 2013–07
  8. By: Christian von Soest (GIGA German Institute of Global and Area Studies); Michael Wahman (London School of Economics)
    Abstract: Since the end of the Cold War, Western powers have frequently used sanctions as a reaction to declining levels of democracy and human rights violations in authoritarian regimes. However, some of the world’s most repressive authoritarian regimes have never been subjected to sanctions, while other more competitive autocracies have been exposed to repeated sanction episodes instigated by Western democracies as an attempt to enhance democracy and human rights. In this paper, we investigate how the United States and the European Union have selectively used sanctions as a tool to improve the level of democracy in targeted authoritarian states. Using a new dataset on democratic sanctions between 1990 and 2010, time - series–cross-sectional logistic regression and a number of strategically selected case studies, we find strong support for the suggestion that senders select economically and politically vulnerable targets where the expected probability of sanction success is high.
    Keywords: democratic sanctions, authoritarian regimes, democratization, imposition, threats.
    Date: 2013–07
  9. By: Weinreich, Daniel
    Abstract: We shed some light on fairness preferences regarding tax evasion. Individuals perceive income inequality which they are responsible for as fair (e.g. work effort) while inequality resulting from factors outside their reach is regarded as unfair (e.g. productivity or wage rate). This affects the incentives to hide income from tax authorities and supply labor. We set up a model where individuals simultaneously choose unreported income and work effort given a linear taxation scheme. We show the conditions for which individuals respond with lower or higher unreported income and work effort when fair tax evasion is introduced. Beyond, it can be shown that unreported income increases while work effort decreases when the tax rate is raised. Finally, we consider a majority voting over redistributive taxation. Thereby, it is shown that the median voter prefers lower (higher) taxation if she evades less (more) taxes than would be fair since raising the tax rate would enlarge (reduce) the deviation from fair tax evasion. This affects the moral cost as peceived by the individuals.
    Keywords: redistributive taxation, majority voting fairness, tax evasion, labor supply
    JEL: D31 D78 H26 H30
    Date: 2013–08
  10. By: Alessandro Nicita; Marcelo Olarreaga; Peri Silva
    Abstract: A rationale for cooperation in trade negotiations is the internalization of terms-of-trade externalities. With the help of a simple theoretical framework we show that the textbook prediction that non-cooperative tariffs are positively correlated to the importer’s market power is reversed when tariffs are set cooperatively. We use this prediction to identify the extent of cooperation reflected in WTO members’ tariffs. Because many members of the WTO apply tariffs well below the negotiated tariff bounds, creating what is known as tariff water, there is also room for WTO members to set non-cooperative tariffs. As expected, we found that in the absence of tariff water, WTO tariffs are set cooperatively. Interestingly, non-cooperative tariff setting is only observed in the presence of suffficiently large amounts of tariff water, suggesting that cooperation in the WTO goes well beyond negotiated tariff bounds. We also found evidence that cooperation within WTO tariff waters can be explained by the fear of retaliation from trading partners with market power and tariff water in their schedules.
    Keywords: Export supply elasticities, WTO cooperation, tariff water
    Date: 2013–06
  11. By: Qiyan ONG (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Yohanes Eko RIYANTO (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Walter E. THESEIRA (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Steven M. SHEFFRIN (Murphy Institute, Department of Economics at Tulane University, 108 Tilton Hall, New Orleans, LA 70115)
    Abstract: Why are individuals willing to pay costs in order to express their voice in decision-making settings? Research suggests voice provides a strategic opportunity to improve outcomes, or the perceived fairness of outcomes. This paper proposes that people are willing to expend resources to express their views to learn about themselves through “self-image signaling.” We distinguish between these differing interpretations of voice through a modified ultimatum game where responders are assigned opportunities to bid for voice, either to the proposer or to a third party. Strikingly, 63% of responders are willing to pay on average 34% of their endowments for the opportunity for voice, even when their messages are sent to a third party and thus hold no strategic value. The act of expressing voice appears to change a responder’s willingness to accept offers, suggesting that voice’s effects on self-image could be as important as any strategic or communications function.
    Keywords: Voice, Self-image, Signaling
    JEL: D03 C91
    Date: 2013–03
  12. By: Florian Lindner
    Abstract: Entry decisions in market entry games usually depend on the belief about how many others are entering the market, the belief about the own rank in a real effort task, and subjects' risk preferences. In this paper I am able to replicate these basic results and examine two further dimensions: (i) the level of strategic sophistication, which has a positive impact on entry decisions, and (ii) the impact of time pressure, which has a (partly) negative influence on entry rates. Furthermore, when ranks are determined using a real effort task, differences in entry rates are explainable by higher competitiveness of males. Additionally, I show that individual characteristics are more important for the entry decision in more competitive environments.
    Keywords: Market entry game, Time pressure, Level-k reasoning, Risk, Competitiveness, Experiment
    JEL: C72 C91 D81
    Date: 2013–07
  13. By: David A. Hennessy (Center for Agricultural and Rural Development (CARD))
    Abstract: In animal agriculture, biosecurity decisions are dispersed across many herd owners. Choices impacting disease spread will be determined by impacts on private economic values, and so are economic externalities. However, externalities are not all alike. By way of three very distinct examples, we demonstrate how they differ and what these differences mean for approaches to policies seeking to manage them. The three examples are an endemic disease pool that can be managed by limiting sources and flows, an exotic disease that can be managed by way of communicated coordination, and an infrastructural support externality that can be managed by disease outbreak insurance. We pay particular attention to how concentration in animal herd ownership affects incentives for disease control. JEL Classifications: D2, H4, Q1
    Keywords: business continuity, complements, infrastructure, substitutes.
    Date: 2013–07
  14. By: OECD
    Abstract: This report presents the findings of a research project to investigate the drivers and criteria shaping the application of genomic biotechnology to health in different national settings, and the barriers to implementation nationally and internationally. A case study approach was adopted for the project. The findings are based on the active participation in the survey of seven self-selected countries, including both OECD member and non-member countries (Finland, Israel, Luxembourg, Mexico, the United Kingdom, China and South Africa). The report outlines a number of potentially important patterns that are seen to emerge when the country case studies are set alongside one another and viewed in transnational perspective. The data, albeit based on limited evidence from a small sample of countries, suggest a significant divergence in the way that different countries are tending to adopt genomics for public health, which may have important implications for thinking about how genomic science and technology might best be employed in the interests of global public health.
    Date: 2013–08–02
  15. By: Maria Teresa Costa-Campi (University of Barcelona & IEB); Néstor Duch-Brown (University of Barcelona & IEB); José García-Quevedo (University of Barcelona & IEB)
    Abstract: The energy industry is facing substantial challenges that require innovation to be fostered. Nevertheless, levels of R&D investment and innovation remain quite low in comparison with other sectors. In this paper we analyse the main drivers of R&D investment and obstacles to innovation in the energy industry. We examine, firstly, whether the stated R&D objectives pursued by firms play a role in their R&D effort. Secondly, we analyse the effects of financial, knowledge and market barriers on the innovation outcomes of the firms. We rely on data from the Technological Innovation Panel (PITEC) for Spanish firms for the period 2003-2010. We use a structural model with three equations corresponding to the decision to carry out R&D or not, the R&D effort and the production of innovations. The results of the econometric estimations show, first, that R&D intensity is positively related to process innovation. Second, the main barriers that hamper innovation in the energy industry are related to market factors while financial and knowledge obstacles are not significant.
    Keywords: R&D, innovation, energy, barriers, regulation
    JEL: Q40 O31
    Date: 2013
  16. By: Felix Munoz-Garcia; Sherzod Akhundjanov (School of Economic Sciences, Washington State University)
    Abstract: This paper investigates the production decisions of polluting and green fi?rms, and how their profi?ts are affected by environmental regulation. We demonstrate that emission fees entail a negative effect on fi?rms? profi?ts, since they increase unit production costs. However, fees can also produce a positive effect for a relatively inefficient ?firm, given that environmental regulation ameliorates its cost disadvantage. If such a disadvantage is sufficiently large, we show that the positive effect dominates, thus leading this ?firm to actually favor the introduction of environmental policy, while relatively efficient fi?rms oppose regulation. Furthermore, we show that such support can not only originate from green firms but, more surprisingly, also from polluting companies.
    Keywords: Cost asymmetries; Cost disadvantage; Emission fees; Green firms
    JEL: L13 D62 H23 Q20
  17. By: Sebastian Elischer (GIGA German Institute of Global and Area Studies)
    Abstract: The effects of organized labor on regime change in developing countries are not clear-cut. Optimists argue that union agitation is conducive to both democratic transition and consolidation processes. Pessimists hold that unions will support any regime that is conducive to their demands. Accordingly, unions may support regime transitions; however, once their economic interests are under threat, they will jeopardize the subsequent consolidation process. Systematic studies on the effects of organized labor on regime change in sub-Saharan Africa are sparse and largely confined to the (pre)transition phase. This article examines the role of organized labor in Niger between 1990 and 2010. Given the high number of regime breakdowns during the period, a longitudinal study of Nigerien labor enables a critical examination of motives and actions of organized labor toward different regime types. In contrast to other recent findings on African unionism, the article confirms the pessimistic view.
    Keywords: political science, democratization, sub-Saharan Africa, trade unions, Niger, civil society, francophone Africa
    Date: 2013–08

This issue is ©2013 by Stan C. Weeber. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.