New Economics Papers
on Collective Decision-Making
Issue of 2013‒09‒28
twenty papers chosen by
Stan C. Weeber, McNeese State University

  1. Majority Runoff Elections: Strategic Voting and Duverger's Hypothesis By Laurent Bouton; Gabriele Gratton
  2. Dissent in Parliament as Reputation Building By Brandon Schaufele
  3. The Effect of Labor Migration on the Diffusion of Democracy: Evidence from a Former Soviet Republic By Toman Omar Mahmoud; Hillel Rapoport; Andreas Steinmayr; Christoph Trebesch
  4. Statistical utilitarianism By Pivato, Marcus
  5. Benchmarking Politicians By Estache, Antonio; Foucart, Renaud
  6. Social motives in intergroup conflict By Ori Weisel; Ro'i Zultan
  7. Does voter turnout affect the votes for the incumbent government? By Rodrigo Martins; Francisco José Veiga
  8. Contractually stable alliances By MAULEON, Ana; SEMPERE-MONERRIS, Jose; VANNETELBOSCH, Vincent
  9. Allocation rules for coalitional network games By CAULIER, Jean-François; MAULEON, Ana; VANNETELBOSCH, Vincent
  10. Information transmission within federal fiscal architectures: Theory and evidence By Axel Dreher; Kai Gehring; Christos Kotsogiannis; Silvia Marchesi
  11. Complementary Roles of Connections and Performance in Political Selection in China By Jia, Ruixue; Kudamatsu, Masayuki; Seim, David
  12. Political power and aid tying practices in the development assistance committee countries By Pincin, Jared
  13. Are Women More Attracted to Cooperation Than Men? By Peter J. Kuhn; Marie-Claire Villeval
  14. Does the Greenspan era provide evidence on leadership in the FOMC? By El-Shagi, Makram; Jung, Alexander
  15. Egocentric framing - one way people may fail in a switch dilemma: Evidence from excessive lane switching By Navon, David; Kaplan, Todd; Kasten, Ronen
  16. What do Environmental and Resource Economists Think? Results from a Survey of AERE Members By Timothy C. Haab; John C. Whitehead
  17. Cost overruns and demand shortfalls – deception or selection? By Eliasson, Jonas; Fosgerau, Mogens
  18. Economic Policy Coordination in the EMU: From Maastricht via SGP to the Fiscal Pact By Jorgen Mortensen
  19. Dividend Policy in Regulated Firms By Francisca Bremberger; Carlo Cambini; Klaus Gugler and Laura Rondi
  20. A review of the certainty effect and influence of information processing By Ramirez, Patrick A.; Levine, Daniel S.

  1. By: Laurent Bouton (Department of Economics, Georgetown University); Gabriele Gratton (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: The majority runoff system is widely used around the world. Yet, our understanding of its properties and of voters’ behavior is limited. In this paper, we fully characterize the set of strictly perfect voting equilibria in large three-candidate majority runoff elections. Considering all possible distributions of preference orderings and intensities, we prove that only two types of equilibria can exist. First, there are always equilibria in which only two candidates receive votes. Second, there may exist an equilibrium in which three candidates receive votes. Its characteristics challenge common beliefs: (i) neither sincere voting by all voters, nor push over tactics (i.e. supporters of the front-runner voting for a less-preferred candidate in order to in?uence who will face the front-runner in the second round) are supported in equilibrium, and (ii) the winner does not necessarily have democratic legitimacy since the Condorcet winner may not even participate in the second round.
    Keywords: Strategic Voting, Runoff Elections, Poisson Games
    JEL: D72
    Date: 2013–09
  2. By: Brandon Schaufele (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: Dissenting votes in parliamentary systems are overt displays of defiance by individual Members of Parliament (MPs) vis-à-vis their parties. Dissension is particularly surprising as in the vast majority of situations voting against one's party yields no change in legislative outcomes while still generating costs for MPs. This study examines the decisions of elected representatives who face conflicting incentives. A model is developed where MPs choose to dissent in an effort to build reputations with their local constituents. Using all 32,216 observations at MP-bill-vote level for the 39th Parliament of Canada, a reputation building hypothesis is specified and tested. I provide evidence that MPs whose previous election was competitive are 13 percent more likely to cast any dissenting vote and, for a one standard deviation decrease in expected margin of victory, 2.3 percent more likely to defect on any given vote, results which suggest that MPs are actively attempting to build reputations with their local constituents
    Keywords: Canadian Parliament; dissent; elections; local politics; politician behavior; reputation
    JEL: D72 D78 H19
    Date: 2013
  3. By: Toman Omar Mahmoud; Hillel Rapoport; Andreas Steinmayr; Christoph Trebesch
    Abstract: Migration contributes to the circulation of goods, knowledge, and ideas. Using community and individual-level data from Moldova, we show that the Emigration episode that started in the late 1990s strongly affected political preferences and electoral outcomes in Moldova during the following decade and was eventually instrumental in bringing down the last ruling Communist government in Europe. Our results are suggestive of information transmission and cultural diffusion channels. Identification relies on the quasi-experimental context studied and on the differential effects arising from the fact that emigration was directed both to more democratic Western Europe and to less democratic Russia
    Keywords: Emigration, political institutions, elections, social networks, Information transmission, cultural diffusion
    JEL: F22 D72 O1
    Date: 2013–08
  4. By: Pivato, Marcus
    Abstract: We show that, in a sufficiently large population satisfying certain statistical regularities, it is often possible to accurately estimate the utilitarian social welfare function, even if we only have very noisy data about individual utility functions and interpersonal utility comparisons. In particular, we show that it is often possible to identify an optimal or close-to-optimal utilitarian social choice using voting rules such as the Borda rule, approval voting, relative utilitarianism, or any Condorcet-consistent rule.
    Keywords: utilitarian; relative utilitarian; approval voting; Borda; scoring rule; Condorcet.
    JEL: D60 D70
    Date: 2013–09–06
  5. By: Estache, Antonio; Foucart, Renaud
    Abstract: We study a political system in which voters can optimally pick between political platforms, but cannot screen the quality of individual politicians associated with these platforms. A bad individual achievement can correspond to either incompetence (adverse selection) or corruption (moral hazard). Information could improve, if independent experts assess achievements as compared to commitments, allowing independent judges to investigate possible corruption. We find that while good experts are always beneficial as they increase transparency, the impact of the quality of judges is ambiguous. Above a threshold, with risk-averse social planners, good judges increase the incentive-compatible punishment of politicians, at the cost of possible judiciary mistakes.
    JEL: D7 D82
    Date: 2013–05
  6. By: Ori Weisel (Max Planck Institute of Economics); Ro'i Zultan (Ben-Gurion University of the Negev)
    Abstract: We experimentally test the social motives behind individual participation in intergroup conflict by manipulating the framing and symmetry of conflict. We find that behavior in conflict depends on whether one is harmed by actions perpetrated by the out-group, but not on one's own influ- ence on the outcome of the out-group. The way in which this harm is presented and perceived dramatically alters participation decisions. When people perceive their group to be under threat, they are mobilized to do what is good for the group and contribute to the conflict. On the other hand, if people perceive to be personally under threat, they are driven to do what is good for themselves and withhold their contribution. The first phenomenon is attributed to group identity, possibly combined with a concern for social welfare. The second phenomenon is attributed to a novel victim effect. Another social motive-reciprocity-is ruled out by the data.
    Keywords: intergroup conflict, intergroup prisoner's dilemma, asymmetric conflict, framing
    JEL: C72 C92 D03 D62 D74 H41
    Date: 2013–09–10
  7. By: Rodrigo Martins (Faculdade de Economia, Universidade de Coimbra); Francisco José Veiga (Universidade do Minho - NIPE)
    Abstract: This paper analyzes the effects of voter turnout on the vote shares received by the incumbent government. A system of simultaneous equations is estimated using a panel dataset of 278 Portuguese municipalities, for the period 1979-2005, covering 10 legislative elections. The results indicate that right-wing governments have lower vote shares when turnout is higher, while left-wing ones seem to be unaffected. There is also evidence of the responsibility hypothesis, that turnout is higher in closer elections, and that regional/local economic variables have non-linear effects on turnout.
    Keywords: Vote shares, Turnout, Legislative Elections, Portugal,
    JEL: D72 H7
    Date: 2013
  8. By: MAULEON, Ana (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium); SEMPERE-MONERRIS, Jose (Department of Economic Analysis and ERI-CES, University of Valencia, Spain; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); VANNETELBOSCH, Vincent (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium)
    Abstract: We analyze how different rules for exiting an alliance (simple majority, unanimity or unanimity with side payments) will affect the formation of strategic alliances. We find that no alliance structure is contractually stable under the simple majority rule. Once unanimous consent is required, asymmetric alliance structures consisting of two alliances are contractually stable. In addition, the grand alliance which is the efficient structure is stable. Allowing for side payments to compensate former partners improves efficiency. Finally, we show that different rules of exit may coexist in different alliances in the long run.
    Keywords: strategic alliances, coalition formation, contractual stability, exit rules
    JEL: C70 L13
    Date: 2013–07–09
  9. By: CAULIER, Jean-François (CES, Université Paris 1 Panthéon-Sorbonne, F-75647 Paris, France); MAULEON, Ana (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium); VANNETELBOSCH, Vincent (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium)
    Abstract: Coalitional network games are real-valued functions defined on a set of players organized into a network and a coalition structure. We adopt a flexible approach assuming that players organize themselves the best way possible by forming the efficient coalitional network structure. We propose two allocation rules that distribute the value of the efficient coalitional network structure: the atom-based flexible coalitional network allocation rule and the player-based flexible coalitional network allocation rule.
    Keywords: networks, coalition structures, allocation rules
    JEL: A14 C71 D85
    Date: 2013–07–09
  10. By: Axel Dreher; Kai Gehring; Christos Kotsogiannis; Silvia Marchesi
    Abstract: This paper explores the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries. Within a two-sided incomplete information principal-agent framework, it analyzes two alternative policy-decision schemes —‘decentralization’ and ‘centralization’— when ‘knowledge’ consists of unverifiable information and the quality of communication depends on the conflict of interests between the government levels. It is shown that, depending on which level of policy decision-making controls the degree of decentralization, the extent of misaligned interests and the relative importance of local and central government knowledge affects the optimal choice of policy-decision schemes. The empirical analysis shows that countries’ choices depend on the relative importance of their private information and the results differ significantly between unitary and federal countries.
    Keywords: delegation, centralization, communication, fiscal decentralization, state and local government
    JEL: H7 H77 D82 D83 C23
    Date: 2013–09
  11. By: Jia, Ruixue; Kudamatsu, Masayuki; Seim, David
    Abstract: Who becomes a top politician in China? We focus on provincial leaders, a pool of candidates for top political office, and examine how their chance of being promoted depends on performance - measured by provincial economic growth - and connections with top politicians - measured by past joint work in the same branch of government. A simple theoretical framework suggests that performance and connections may interact, an aspect ignored in the previous literature. Over the period 1993-2009, we find a positive correlation between promotion and growth that is robustly stronger for connected provincial leaders than for unconnected ones. This evidence indicates that performance and connections are complements in the Chinese political selection process. Auxiliary evidence suggests that the documented promotion pattern does not distort the allocation of talent.
    Keywords: Chinese provincial leaders; political selection in autocracy; promotion; social networks
    JEL: O53 P26
    Date: 2013–06
  12. By: Pincin, Jared
    Abstract: This paper examines on a panel of 22 OECD Development Assistance Committee countries whether fragmentation of executive power and the degree of competition in the legislative branch of government increases the amount of tied aid over the 1979-2009 period. Fragmentation and competition are broadly defined as the degree to which the costs of a dollar of aid expenditure are internalized by decision makers and the relative strength of the government’s position vis-à-vis legislative composition respectively. The empirical results show tied aid, both in levels and as a percentage of total aid, increases as the number of decision makers within the government increases and decreases as the proportion of excess seats a governing coalition holds above a simple majority increases.
    Keywords: Official Development Assistance (ODA); tied aid; fragmented government; political economy
    JEL: F35
    Date: 2013–08–01
  13. By: Peter J. Kuhn; Marie-Claire Villeval
    Abstract: We conduct a real-effort experiment where participants choose between individual compensation and team-based pay. In contrast to tournaments, which are often avoided by women, we find that women choose team-based pay at least as frequently as men in all our treatments and conditions, and significantly more often than men in a well-defined subset of those cases. Key factors explaining gender patterns in attraction to co-operative incentives across experimental conditions include women’s more optimistic assessments of their prospective teammate’s ability and men’s greater responsiveness to efficiency gains associated with team production. Women also respond differently to alternative rules for team formation in a manner that is consistent with stronger inequity aversion
    JEL: C91 J16 J24 J31 M5
    Date: 2013–08
  14. By: El-Shagi, Makram; Jung, Alexander
    Abstract: The aim of this paper is to examine whether Chairman Greenspan influenced the Reserve Bank Presidents. This question is interesting, because it has been argued that their preferences would be more persistent compared to those of the Governors. We estimate individual Taylor-type reaction functions for the Federal Reserve Districts using their voiced interest rate preferences during the policy go-around as well as real-time economic information on the inflation and unemployment gap. A bootstrap analysis exploits information contained in these reaction functions and constructs counterfactual distributions of disagreement among the Federal Reserve Districts, assuming the absence of factors that could have enforced consensus. We compare these simulated distributions with the observed disagreement during the committee deliberations and find empirical evidence in favour of coordination. This detected coordination helped to bring the preferences of the Federal Reserve Districts more in line with Chairman Greenspan’s views. JEL Classification: C15, C53, D72, E58
    Keywords: bootstrap, federal Reserve Districts, greenspan era, individual reaction functions, real-time data
    Date: 2013–08
  15. By: Navon, David; Kaplan, Todd; Kasten, Ronen
    Abstract: To study switching behavior, an experiment mimicking the state of a driver on the road was conducted. In each trial participants were given a chance to switch lanes. Despite the fact that lane switching had no sound rational basis, participants often switched lanes when the speed of driving in their lane on the previous trial was relatively slow. That tendency was discerned even when switching behavior had been sparsely reinforced, and was especially marked in almost a third of the participants, who manifested it consistently. The findings illustrate a type of behavior occuring in various contexts (e.g., stocks held in a portfolio, conduct pertinent for residual life expectancy, supermarket queues). We argue that this behavior may be due to a fallacy reminiscent of that arising in the well-known “envelopes problem”, in which each of two players holds a sum of money of which she knows nothing about except that it is either half or twice the amount held by the other player. Players may be paradoxically tempted to exchange assets, since an exchange fallaciously appears to always yield an expected value greater than whatever is regarded as the player’s present assets. We argue that the fallacy is due to egocentrically framing the problem as if the “amount I have” is definite, albeit unspecified, and show that framing the paradox acentrically instead eliminates the incentive to exchange assets. A possible psychological source for the human disposition to frame problems in a way that inflates expected gain is discussed. Finally, a heuristic meant to avert the source of the fallacy is proposed.
    Keywords: Decision making; Reasoning; Cognitive fallacies and biases; Switching behavior
    JEL: C9 C91 D03
    Date: 2013–09–18
  16. By: Timothy C. Haab; John C. Whitehead
    Abstract: In this paper we present results from an opinion survey of Association of Environmental and Resource Economists members concerning issues ranging from basic market failure propositions to current policy questions to environmental behavior. The topical issues considered span the discipline including air and water pollution, sustainability, fishery, forestry and energy economics. We use entropy analysis to determine issues where there is consensus and multivariate analysis of the determinants of opinions. We find that AERE members reach consensus on a number of items of opinion and there are a number of items for which consensus is more difficult to reach. We find that agreement with items of opinion is influenced by noneconomic factors: concern about the environment and natural resources, political ideology, gender, the number of children in the household and United States residence. Key Words:
    Date: 2013
  17. By: Eliasson, Jonas; Fosgerau, Mogens
    Abstract: A number of highly cited papers by Flyvbjerg and associates have shown that ex ante infrastructure appraisals tend to be overly optimistic. Ex post evaluations indicate a bias where investment costs are higher and benefits lower on average than predicted ex ante. These authors argue that the bias must be attributed to intentional misrepresentation by project developers. This paper shows that the bias may arise simply as a selection bias, without there being any bias at all in predictions ex ante, and that such a bias is bound to arise whenever ex ante predictions are related to the decisions whether to implement projects. Using a database of projects we present examples indicating that the selection bias may be substantial. The examples also indicate that benefit-cost ratios remains a useful selection criterion even when cost and benefits are highly uncertain, gainsaying the argument that such uncertainties render cost-benefit analyses useless.
    Keywords: cost overruns; cost escalation; forecast accuracy; cost-benefit analysis; appraisal; selection bias; winner’s curse
    JEL: H4 H43 L2 R4 R42
    Date: 2013
  18. By: Jorgen Mortensen
    Abstract: The present paper first takes a step backwards with an attempt to situate the adoption of this Treaty in discussion of the SGP and the “Maastricht criteria” (the criteria for EMU membership fixed in the Maastricht Treaty) in a longer perspective of the sharing of competences for macroeconomic policy making within the EU from the initial Treaty to the Maastricht Treaty and the Stability and Growth Pact (SGP). It then presents the main features of the Fiscal Treaty and its relation to the SGP and draws some conclusions as regards the importance and relevance of this new step in the process of economic policy coordination. It concludes that the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union does not seem to offer a definitive solution to the problem of finding the appropriate budgetarymonetary policy mix in the EMU already well identified in the Delors report in 1989 and regularly emphasised ever since and now seriously aggravated due to the Crisis. Furthermore, the implementation of this Treaty may under certain circumstances contribute to an increase in the uncertainties as regards the distribution of the competences between the European Parliament and national parliaments and between the former and the Commission and the Council.
    Keywords: Economic Policy Coordination, Stability and Growth Pact, Maastricht Treaty, Fiscal Treaty, Sustainability of Fiscal Policy
    JEL: E61 E62 E52
    Date: 2013–08
  19. By: Francisca Bremberger; Carlo Cambini; Klaus Gugler and Laura Rondi
    Abstract: We study the impact of different regulatory and ownership regimes on the dividend policy of regulated firms. Using a panel of 106 publicly traded European electric utilities in the period 1986-2010, we link payout and smoothing decisions to the implementation of different regulatory mechanisms (cost plus vs. incentive regulation) and to firm ownership (state vs. private). After controlling for the potential endogeneity of the regulatory mechanism, our results show that utilities subject to incentive regulation smooth their dividends less than firms subject to cost-based regulation and present higher impact effects and target payout ratios. This suggests that when managers are more sensitive to competition-like efficiency pressures following the adoption of incentive regulation, they adopt a dividend policy more responsive to earnings variability and more consistent with optimal cash management. These results, however, apply only to private utilities. If the state still has ultimate control, smoothing of dividends remains irrespective of the regulatory mechanism. It seems that corporate governance (i.e. state control) trumps regulation when it comes to dividend payout policy.
    Keywords: Dividends, Lintner model, incentive regulation, electricity
    JEL: G35 G38 L51 L94
    Date: 2013–07
  20. By: Ramirez, Patrick A.; Levine, Daniel S.
    Abstract: This review considers two explanations for behavioral decision-making in reference to the certainty and framing effects. The findings from various paradigms such as a single questionnaire, gambles with repetition, and gambles guided by feedback are explained either by prospect theory or by expected utility theory. Finally this review attempts to account for the different findings and offers a possible explanation for the conflicting results by considering the role of experience which in turn can alter how information in processed as described by fuzzy trace theory which is a dual process theory of reasoning. --
    Keywords: expected utility theory,prospect theory,fuzzy trace theory,certainty effect,framing effect
    JEL: A10 Y80
    Date: 2013

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