New Economics Papers
on Collective Decision-Making
Issue of 2013‒11‒09
nineteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Approval Voting and Scoring Rules with Common Values By David S. Ahny; Santiago Oliveros
  2. Voting in committee: firm value vs. back scratching. By Ravanel, M.
  3. Trust and Manipulation in Social Networks By Manuel Förster; Ana Mauleon; Vincent Vannetelbosch
  4. Fair Apportionment in the View of the Venice Commission's Recommendation By Peter Biro; Laszlo A. Koczy; Balazs Sziklai
  5. Elected vs appointed public law enforcers By Éric Langlais; Marie Obidzinski
  6. Aggregation of endogenous information in large elections By Santiago Oliveros
  7. The Tempered Ordered Probit (TOP) Model with an Application to Monetary Policy By Greene, William H.; Gillman, Max; Harris, Mark N.; Spencer, Christopher
  8. Political Economy of Trade Liberalization: The case of postwar Japan By NAOI Megumi; OKAZAKI Tetsuji
  9. Demand for Slant: How Abstention Shapes Voters’ Choice of News Media By Santiago Oliveros; Felix Vardy
  10. When does cooperation win and why? Political cycles and participation in international environmental agreements By Antoine CAZALS; Alexandre SAUQUET
  11. Incumbency Advantage in an Electoral Contest By Matthew T. Cole; Ivan Pastine; Tuvana Pastine
  12. Governance Mode Choice in Collaborative PhD Projects By Negin Salimi; Rudi Bekkers; Koen Frenken
  13. Intra-household Selection into Migration: Evidence from a Matched Sample of Migrants and Origin Households in Senegal By Isabelle Chort; Jean-Noël Senne
  14. Sweets or Alcohol? The Gender Battle within Japanese Families By Piao, Xiangdan
  15. Corporate Governance and Corporate Social Performance By Kurt A. Desender; Mircea Epure
  16. Minimum Cost Connection Networks: Truth-telling and Implementation By Jens Leth Hougaard; Mich Tvede
  17. Dynamic Consistency and Ambiguity: A Reappraisal By HILL, Brian
  18. 'Serving Two Masters' and the Chief Audit Executive's Communication: Experimental Evidence About Internal Auditors’ Judgments By Hoos , Florian; Kochetova-Kozloski, Natalia; D'Arcy , Anne
  19. Is There a Role for Cost-Benefit Analysis Beyond the Nation-State?: Lessons from International Regulatory Co-Operation By Alemanno , Alberto

  1. By: David S. Ahny; Santiago Oliveros
    Abstract: Consider the problem of deciding a winner among three alternatives when voters have common values, but private information regarding the values of the alternatives. We compare approval voting with other scoring rules. For any finite electorate, the best equilibrium under approval voting is more efficient than either plurality rule or negative voting. If any scoring rule yields a sequence of equilibria that aggregates information in large elections, then approval voting must do so as well.
    Date: 2013–09–01
  2. By: Ravanel, M.
    Abstract: In this paper, I study how the CEO's election can be biased if some directors in the board belong to the same network. I use a static Bayesian game. Directors want to elect the best candidate but they also want to vote for the winner. In that context, results show that, when no candidate is part of the network, boards with a network perform better in electing the right candidate. On the other hand, it becomes detrimental for stockholders if one candidate is part of the network. Indeed, compared to a situation where there are no interconnections between directors, the directors who are members of a network vote more often for the candidate they think is best, rather than for the one they think might win. The ones who are not part of the network follow their lead. Thus the network has power on the result of the election and therefore limits the power of the future CEO.
    Keywords: Networks, corporate governance.
    JEL: D71 G34 Z13
    Date: 2013
  3. By: Manuel Förster (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique); Ana Mauleon (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CEREC - Université Saint-Louis - Bruxelles); Vincent Vannetelbosch (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CEREC - Université Saint-Louis - Bruxelles)
    Abstract: We investigate the role of manipulation in a model of opinion formation where agents have opinions about some common question of interest. Agents repeatedly communicate with their neighbors in the social network, can exert some effort to manipulate the trust of others, and update their opinions taking weighted averages of neighbors' opinions. The incentives to manipulate are given by the agents' preferences. We show that manipulation can modify the trust structure and lead to a connected society, and thus, make the society reaching a consensus. Manipulation fosters opinion leadership, but the manipulated agent may even gain influence on the long-run opinions. In sufficiently homophilic societies, manipulation accelerates (slows down) convergence if it decreases (increases) homophily. Finally, we investigate the tension between information aggregation and spread of misinformation. We find that if the ability of the manipulating agent is weak and the agents underselling (overselling) their information gain (lose) overall influence, then manipulation reduces misinformation and agents converge jointly to more accurate opinions about some underlying true state.
    Keywords: Social networks; trust; manipulation; opinion leadership; consensus; wisdom of crowds
    Date: 2013–09
  4. By: Peter Biro (Momentum Game Theory Research Group, Institute of Economics, Centre for Economic and Regional Studies); Laszlo A. Koczy (Momentum Game Theory Research Group, Institute of Economics, Centre for Economic and Regional Studies); Balazs Sziklai (Momentum Game Theory Research Group, Institute of Economics, Centre for Economic and Regional Studies)
    Abstract: In this paper we analyze the consequences of the fairness recommendation of the Venice Commission in allocating voting districts among larger administrative regions. This recommendation requires the size of any constituency not to differ from the average constituency size by more than a fixed limit. We show that this minimum difference constraint, while attractive per definition, is not compatible with monotonicity and Hare-quota properties, two standard requirements of apportionment rules. We present an algorithm that efficiently finds an allotment such that the differences from the average district size are lexicographically minimized. This apportionment rule is a well-defined allocation mechanism compatible with and derived from the recommendation of the Venice Commission. Finally, we compare this apportionment rule with mainstream mechanisms using real data from Hungary and the United States.
    Keywords: Apportionment, voting, elections, Venice Commission, proportionality, lexicographic ordering
    JEL: C71 D72
    Date: 2013–11
  5. By: Éric Langlais; Marie Obidzinski
    Abstract: This paper revisits the issue of law enforcement and the design of monetary sanctions when the public law enforcer's incentives depart from those of a benevolent authority, which is the most frequent assumption made in the literature on crime deterrence. We …rst consider the case of an elected enforcer. We …nd that when the harm generated by offenses is quite small relative to the average private bene…ts, equilibrium with weak enforcement/low sanction prevails. Instead, when the harm generated by offenses is high relative to the average private bene…ts, it is the equilibrium with strong enforcement/high sanctions that prevails. Therefore, we provide an explanation for the empirical puzzle highlighted by Lin(2007): elected enforcers punish major (minor) crimes more (less) severely than the benevolent social planer. The case of an appointed enforcer prone to rent seeking is also considered. The monetary sanction under rent seeking is closer to the utilitarian level, as compared with the one under election.
    Keywords: law enforcement, deterrence, monetary sanctions, punishment, electoral competition, democracy, rent seeking, dictature
    JEL: D72 D73 H1 K14 K23 K4
    Date: 2013
  6. By: Santiago Oliveros
    Abstract: We study aggregation of information when voters can collect information of different precision, with increased precision entailing an increasing marginal cost. In order to properly understand the incentives to collect information we introduce another dimension of heterogeneity: on top of the ideological dimension we allow for different levels of intensity in preferences. Contrary to traditional models of endogenous information, in equilibrium, there are voters collecting information of different qualities. After characterizing all symmetric Bayesian equilibria in pure strategies for arbitrary rules of election and fairly general distribution of types. We study information aggregation in symmetric electorates and show that information aggregates even when voters collect information of different qualities.
    Date: 2013–05–01
  7. By: Greene, William H.; Gillman, Max; Harris, Mark N.; Spencer, Christopher
    Abstract: We propose a Tempered Ordered Probit (TOP) model. Our contribution lies not only in explicitly accounting for an excessive number of observations in a given choice category - as is the case in the standard literature on inflated models; rather, we introduce a new econometric model which nests the recently developed Middle Inflated Ordered Probit (MIOP) models of Bagozzi and Mukherjee (2012) and Brooks, Harris, and Spencer (2012) as a special case, and further, can be used as a specification test of the MIOP, where the implicit test is described as being one of symmetry versus asymmetry. In our application, which exploits a panel data-set containing the votes of Bank of England Monetary Policy Committee (MPC) members, we show that the TOP model affords the econometrician considerable flexibility with respect to modeling the impact of different forms of uncertainty on interest rate decisions. Our findings, we argue, reveal MPC members. asymmetric attitudes towards uncertainty and the changeability of interest rates.
    Keywords: Monetary policy committee, voting, discrete data, uncertainty, tempered equations
    JEL: C3 E50
    Date: 2013–09
  8. By: NAOI Megumi; OKAZAKI Tetsuji
    Abstract: How did the postwar newer democracies, whose governments faced pressure from both vested special interests and voters, achieve trade liberalization? Exploiting the case of trade liberalization in Japan in the 1960s, this paper addresses this question. Because the benefits and costs of trade liberalization are unequally distributed among the population, generating winners and losers, trade liberalization is inherently a highly political issue. The Japanese government and the Liberal Democratic Party (LDP) leaders used two tactics to build a coalition of legislators for trade liberalization. While they used sequencing of liberalization to buy off support from the legislators of the Upper House, they relied on side payments for the legislators of the Lower House. This strategy choice was consistent with the difference in the sizes of the electoral districts between the Upper House and the Lower House.
    Date: 2013–11
  9. By: Santiago Oliveros; Felix Vardy
    Abstract: Political commentators warn that the fragmentation of the modern media landscape induces voters to withdraw into “information cocoons” and segregate along ideological lines. We show that the option to abstain breaks ideological segregation and generates “cross-over” in news consumption: voters with considerable leanings toward a candidate demand information that is less biased toward that candidate than voters who are more centrist. This non-monotonicity in the demand for slant makes voters’ ideologies non-recoverable from their choice of news media and generates disproportionate demand for media outlets that are centrist or only moderately biased. It also implies that polarization of the electorate may lead to ideological moderation in news consumption. Thus, our results cast doubt on the oft-prophesied, imminent demise of mainstream media and may help to explain recent empirical findings showing less ideological segregation in news consumption than predicted by extant theories.
    Date: 2013–06–19
  10. By: Antoine CAZALS; Alexandre SAUQUET
    Abstract: Is there a strategically beneficial time for political leaders to make international environmental commitments? Based on the political cycles theory we argue that leaders have incentives to delay costly ratification of international environmental agreements to the post-electoral period. However, the cost of participating in these agreements are often lower for developing countries, and they may benefit from indirect gains, which may make them more prone to ratifying in the pre-electoral period. These hypotheses are empirically assessed by studying the ratification process of 48 global environmental agreements censused in the ENTRI database from 1976 to 1999. We use a duration model in which time is measured on a daily basis, enabling us to precisely identify pre- and post-electoral periods -- a significant challenge in political cycles studies. Our investigation reveals the existence of political ratification cycles that are of substantial magnitude and non-linear over the pre- and post-electoral years.
    Keywords: International Environmental Agreements, Political cycles, Ratification, duration model
    Date: 2013
  11. By: Matthew T. Cole (Department of Economics, Florida International University); Ivan Pastine (University College Dublin); Tuvana Pastine (National University of Ireland Maynooth)
    Abstract: In a campaign spending contest model, this paper investigates whether the sources of incumbency advantage are able to generate the observed pattern of campaign spending and incumbent reelection rates in US elections and assesses the degree to which campaign ?nance reform can mitigate the negative repercussions of incumbency advantage. The paper extends the existing literature by allowing the electoral bene?t to the candidate¡¯s visibility to be stochastic which is intuitively appealing since one dollar of extra spending should not take a candidate from a certain loser to a certain winner. Officeholders¡¯ ability to generate free media exposure alone is shown to be unable to match empirical regularities. Incumbent¡¯s superior fundraising efficiency is the key to matching the observed patterns. In contrast to previous literature, the model predicts that campaign ?nance legislation can help reduce the challenger scare-off effect of incumbency advantage.
    Date: 2013–10
  12. By: Negin Salimi; Rudi Bekkers; Koen Frenken
    Abstract: Joint PhD projects are a promising form of research collaboration, connecting universities to firms and public research organizations. Entering into such collaborations, however, requires decisions in terms of governance. This paper investigates how a university and its partners govern such projects, including decision-making, daily management and disclosure policies. Earlier studies show that shared governance modes have had a higher success rate than centralized governance modes. Nevertheless, more than two thirds of the 191 joint PhD projects we investigated opted for centralized rather than shared governance. Our findings show that: (i) geographical and cognitive distance render the adoption of a shared governance mode less likely; (ii) the partner controlling critical resources tends to centralize governance, and (iii) partnering firms are more likely to put restrictions on publication output than public research organizations. We therefore recommend that universities and their partners take these aspects into account when selecting such projects.
    Keywords: university-industry collaboration, collaborative PhD project, shared governance, centralized governance, proximity, resource imbalances, publication disclosure.
    Date: 2013–10
  13. By: Isabelle Chort (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, DIAL - Développement, institutions et analyses de long terme - Institut de recherche pour le développement [IRD]); Jean-Noël Senne (DIAL - Développement, institutions et analyses de long terme - Institut de recherche pour le développement [IRD], PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)
    Abstract: This paper fills the gap between individual selection models and collective approaches of migration. We build a theoretical model in order to account for household-based migration decisions and derive its implications on migrant selection. Assuming that the origin household maximizes a collective utility including earnings but also further remittances when choosing the one among its members who is to migrate, migrant selection in this case may differ from what is predicted by a pure individual decision model. Therefore, we specifically tackle the so far under-explored issue of intra-household selection into migration in order to identify what are the key determinants of household members' location choices. We derive our estimation procedure from an extension of the Roy-Dahl model and provide empirical evidence using a unique matched sample of 926 Senegalese migrants in three destination countries - France, Italy and Mauritania - and their origin household in Senegal. Our results show that expected remittances, along with earnings differentials, play a major role in shaping intra-household selection patterns, which stands in striking contrast with usual predictions from individual self-selection models.
    Keywords: Migration ; Remittances ; Intra-household allocation ; Selection
    Date: 2013–10–25
  14. By: Piao, Xiangdan
    Abstract: In this study, I examine the allocation mechanism within families by using the collective model. The empirical results suggest that a wife's income proportion affects her budget proportion. This connection exists for food and shows that a wife's income proportion is positively correlated with her preferred share of the food budget but is negatively correlated with a husband's preferred share of the food budget. I also explored the changes in a wife's income proportion and budget proportion between 1989 and 2004 and found that the correlation between the two became larger, suggesting that a wife's distribution power strengthened during this period.
    Keywords: Collective model, Preference, Income proportion, Budget proportion
    JEL: D11 J12 J16
    Date: 2013–10
  15. By: Kurt A. Desender; Mircea Epure
    Abstract: By integrating the agency and stakeholder perspectives, this study aims to provide a systematic understanding of the firm- and institutional-level corporate governance factors that affect corporate social performance (CSP). We analyze a large global panel dataset and reveal that CSP is positively associated with board independence, but negatively with ownership concentration. These results underscore the idea that the benefits of CSP do not flow to shareholders to the same extent as the costs and that the allocation of resources to CSP is lower when shareholders are powerful. Furthermore, these findings indicate that independent directors should be understood as agents in their own right, not only focused on defending shareholder interests. We also find that CSP is negatively related to investor protection and shareholder-oriented environments, while it is positively related to egalitarian environments. Finally, we jointly analyze firm-level drivers and institutional contexts.
    Keywords: corporate social performance, corporate governance, agency theory, stakeholder theory
    JEL: A13 G3 M0 M1 M14 M4 M41
    Date: 2013–10
  16. By: Jens Leth Hougaard (Department of Food and Resource Economics, University of Copenhagen); Mich Tvede (Newcastle University Business School, Newcastle University)
    Abstract: In the present paper we consider the allocation of cost in connection networks. Agents have connection demands in form of pairs of locations they want to be connected. Connections between locations are costly to build. The problem is to allocate costs of networks satisfying all connection demands. We use three axioms to characterize allocation rules that truthfully implement cost minimizing networks satisfying all connection demands in a game where: (1) a central planner announces an allocation rule and a cost estimation rule; (2) every agent reports her own connection demand as well as all connection costs; and, (3) the central planner selects a cost minimizing network satisfying reported connection demands based on estimated connection costs and allocates true connection costs of the selected network.
    Keywords: axiomatic characterization, connection networks, cost sharing, implementation, truth-telling
    JEL: C70 C72 D71 D85
    Date: 2013–10
  17. By: HILL, Brian
    Abstract: It is commonly argued that dynamic consistency, consequentialism and non-expected utility are incompatible. The first aim of this paper is to rebut such arguments, by targeting the implicit assumption that the relevant contingencies correspond to objective resolutions of uncertainty (that is, events in a state space). These are not necessarily the same as the contingencies that the decision maker envisages, and we argue that any reasonable notion of dynamic consistency involves the latter, rather than the former, sort of contingency. We formulate such a version of dynamic consistency and show it to be compatible with consequentialism and non-expected utility. We then analyze the economic consequences of this new perspective. On the one hand, it provides a principled justification for restrictions on non-expected utility models (such as that proposed by Epstein and Schneider (2003)) in applications to dynamic choice problems. On the other hand, it provides a new analysis of the issue of attitude to information; contra standard arguments, the value of information under non-expected utility is non-negative as long as the information offered does not compromise information that the decision maker had otherwise expected to receive. Finally, we give a representation theorem for the contingencies the decision maker envisages, in the case where he uses the maxmin expected utility rule.
    Keywords: Decision under Uncertainty; Dynamic Consistency; Dynamic Choice; Value of Information; Epistemic Contingency
    JEL: D81 D83
    Date: 2013–05–21
  18. By: Hoos , Florian; Kochetova-Kozloski, Natalia; D'Arcy , Anne
    Abstract: The position of an internal audit function as a “servant of two masters” (i.e. management and the audit committee) may lead to a conflict of priorities. In this setting, the tone at the top set by the Chief Audit Executive (CAE) plays a critical role in balancing the potentially competing preferences of management and the audit committee. We examine whether the emphasis in the CAE’s communication with internal auditors influences their judgments. We also test whether such influence is more pronounced in an internal audit task where potential for justification created through task complexity and ambiguity is high, as compared to low. We test two hypotheses in a mixed experimental design with the communicated preferences of the CAE to subordinates (cost reduction vs. effectiveness of internal controls) as a between-subjects factor, and levels of opportunity for justification (low, medium, high) manipulated within subjects. Findings suggest that the emphasis in the CAE’s message can bias internal auditors’ judgments, and such influence is more pronounced when the opportunity for justification is high, resulting in the elimination of a significantly greater number of internal controls and the design of less effective processes.
    Keywords: corporate governance; internal audit function; effectiveness; internal controls
    JEL: G34 M42 M48
    Date: 2013–07–28
  19. By: Alemanno , Alberto
    Abstract: In recent decades, governments across the world actively cooperated to harmonize and coordinate policies “behind the borders” through a variety of harmonization efforts at multilateral, as well as regional and bilateral, levels. These efforts have been dictated by the trade liberalization agenda, which perceives domestic regulatory action as a factor impeding international trade. While the WTO has been successful in removing barriers to trade at the border, it is proving less effective in the fight against non-tariff barriers (NTBs), today’s most prominent obstacles to trade exchanges. Given the current inability of the WTO to effectively address such concerns, some countries seem willing to go beyond traditional international treaty making and to explore new avenues of cooperation. The emerging phenomenon of “horizontal regulatory cooperation,” i.e., cooperation on crosscutting issues such as risk assessment, impact assessment, and cost-benefit analysis, seems to offer a promising venue for overcoming regulatory divergence. It relies on the assumption that substantive regulatory convergence can be facilitated by convergence of the general way in which regulators approach standard setting. At a time of growing international interest and policy diffusion of cost-benefit analysis, this chapter explores whether cost-benefit analysis could be used to promote rationality in regulatory decisionmaking beyond the nation-state. In so doing, it draws on the recent experience of international regulatory cooperation of some industrialized countries and examines the extent to which developing nations may be willing and able to participate in this cooperation exercise.
    Keywords: global policy; WTO; regulatory cooperation; harmonisation; impact assessment; risk assessment; cost-benefit analysis; evidence-based policy-making; regulatory hindsight; risk management; hybridization; regulatory foresight
    JEL: K23 K32
    Date: 2013–11–04

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