New Economics Papers
on Collective Decision-Making
Issue of 2014‒02‒15
fifteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Almost orthogonal outcomes under probabilistic voting: A cautionary example By Dolmas, Jim
  2. The Voters' Curses: The Upsides and Downsides of Political Engagement By Prato, Carlo; Wolton, Stephane
  3. Does Money Make People Right-Wing and Inegalitarian? A Longitudinal Study of Lottery Winners By Powdthavee, Nattavudh; Oswald, Andrew J
  4. Consistent collective decisions under majorities based on differences By Mostapha Diss; Patrizia Pérez-Asurmendi
  5. Political Firms, Public Procurement, and the Democratization Process By Straub, Stéphane
  6. Aggregating infinitely many probability measures By Frederik Herzberg
  7. Allocating value among farsighted players in network formation By Nicolas CARAYOL; Remi DELILLE; Vincent VANNETELBOSCH
  8. Eco-regional Cartels on the Genetic Resource Market and the case of the Andean Community's legislation By Winands, Sarah; Holm-Müller, Karin
  9. The Political Economy of FDI flows into Developing Countries: Does the depth of International Trade Agreements Matter? By Rana, Arslan Tariq; Kebewar, Mazen
  10. Testing metrics to prioritise environmental projects By Pannell, David J; Gibson, Fiona L
  11. Coordination in Public Good Provision: How Individual Volunteering is Impacted by the Volunteering of Others By Theodoros M. Diasakos; Florence Neymotin
  12. Dynamics of Military Conflict: an Economics Perspective By Beckmann, Klaus; Reimer, Lennart
  13. Social Capital and Incentives in the Provision of Product Quality by Cooperatives By Deng, Wendong; Hendrikse, George
  14. The Conditions for Successful Collaboration over Water Policy: Substance versus Process By Christopher Bruce; Kaveh Madani
  15. The Stability and Effectiveness of Climate Coalitions: A Comparative Analysis of Multiple Integrated Assessment Models By Kai Lessmann; Ulrike Kornek; Valentina Bosetti; Rob Dellink; Johannes Emmerling; Johan Eyckmans; Miyuki Nagashima; Hans-Peter Weikard; Zili Yang

  1. By: Dolmas, Jim
    Abstract: I illustrate by example a way in which equilibria under probabilistic voting are fragile with respect to assumptions about the non-policy components of voter preferences. I also offer intuition for the fragility using the social welfare functions which also describe the equilibria.
    Keywords: Probabilistic voting; political economy
    JEL: D72 D78
    Date: 2014–02–11
  2. By: Prato, Carlo; Wolton, Stephane
    Abstract: Scholars have long deplored voters' lack of interest in politics and argue greater political engagement would improve the performance of democracy. We consider a model of elections where successful communication of political messages during campaigns requires efforts by politicians and a representative voter. The voter's incentive to pay attention to politics affects the effectiveness of the electoral process as screening and disciplining device. The performance of the electoral process and the voter's level of political activity are low when the voter cares little about politics--this is the curse of the apathetic voter--, or cares a lot about politics--this is the curse of the engaged voter. Consequently, an engaged voter is not always an active voter and fostering political engagement (e.g., by lowering the cost of political information or facilitating policy changes) might have negative consequences on voter's attention to politics and welfare.
    Keywords: Political Apathy, Political Engagement, Elections, Campaigns, Policy Change, Institutional Design, Political Information
    JEL: D72 D78 D83
    Date: 2014–02–05
  3. By: Powdthavee, Nattavudh (London School of Economics); Oswald, Andrew J (Department of Economics, University of Warwick)
    Abstract: The causes of people’s political attitudes are largely unknown. We study this issue by exploiting longitudinal data on lottery winners. Comparing people before and after a lottery windfall, we show that winners tend to switch towards support for a right-wing political party and to become less egalitarian. The larger the win, the more people tilt to the right. This relationship is robust to (i) different ways of defining right-wing, (ii) a variety of estimation methods, and (iii) methods that condition on the person previously having voted left. It is strongest for males. Our findings are consistent with the view that voting is driven partly by human self-interest. Money apparently makes people more right-wing Key words: Voting; gender ; lottery wins ; political preferences ; income ; attitudes JEL classification: D1 ; D72 ; H1 ; J7
    Date: 2014
  4. By: Mostapha Diss (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France, Université Jean Monnet, Saint-Etienne, F-42000, France); Patrizia Pérez-Asurmendi (Grupo de investigacion PRESAD, Universidad de Valladolid, Avda. Valle de Esgueva 6,47011, Valladolid, Spain & Grupo de investigacion SEED, Universidad Publica de Navarra, Campus de Arrosadia, 31006, Pamplona, Spain)
    Abstract: The main criticism to the aggregation of individual preferences under majority rules refers to the possibility of reaching inconsistent collective decisions from the election process. In these cases, the collective preference includes cycles and even could prevent the election of any alternative as the collective choice. The likelihood of consistent outcomes under two classes of majority rules constitutes the aim of this paper. Specifically, we focus on majority rules that require certain consensus in individual preferences to declare an alternative as the winner. In the case of majorities based on difference of votes, such requirement asks to the winner alternative to obtain a difference in votes with respect to the loser alternative taken into account that individuals are endowed with weak preference orderings. Same requirement is asked to the restriction of these rules to individual linear preferences, whereas in the case of majorities based on difference in support, the requirement has to do with the difference in the sum of the intensities for the alternatives in contest.
    Keywords: Majorities based on difference of votes, Majorities based on difference in support, Probability, Transitivity, Triple-acyclicity
    JEL: D72
    Date: 2014
  5. By: Straub, Stéphane
    Abstract: In 2008, an opposition coalition defeated the Paraguayan Colorado Party, which had been in power for 61 years, including 35 years of the longest dictatorship in South America. Using data of all the public procurement transactions from 2004 through 2011 and the political connections of the 700 largest public providers, this paper documents how the volume of contracts received by connected firms evolved after this landmark political change. It shows that firms connected with the first ring of power were punished and that there were efficiency gains, mostly in the form of institutions shifting to bigger and more competitive contracts, but that these gains were constrained by the scarcity of entrepreneurs able to step in to replace firms connected to the previous regime. This demonstrates that the potential economic benefits of democratization are hampered by the perverse rent-seeking entrepreneurial incentives created by a long-term single-party authoritarian regime.
    Keywords: Procurement, Political Connections, Rent-seeking, Democratization, Authoritarian regimes.
    JEL: D72 H57 O5
    Date: 2014–01–29
  6. By: Frederik Herzberg (Center for Mathematical Economics, Bielefeld University)
    Abstract: The problem of how to rationally aggregate probability measures occurs in particular (i) when a group of agents, each holding probabilistic beliefs, needs to rationalise a collective decision on the basis of a single ‘aggregate belief system’ and (ii) when an individual whose belief system is compatible with several (possibly infinitely many) probability measures wishes to evaluate her options on the basis of a single aggregate prior via classical expected utility theory (a psychologically plausible account of individual decisions). We investigate this problem by first recalling some negative results from preference and judgment aggregation theory which show that the aggregate of several probability measures should not be conceived as the probability measure induced by the aggregate of the corresponding expected-utility preferences. We describe how McConway’s (Journal of the American Statistical Association, vol. 76, no. 374, pp. 410–414, 1981) theory of probabilistic opinion pooling can be generalised to cover the case of the aggregation of infinite profiles of finitely additive probability measures, too; we prove the existence of aggregation functionals satisfying responsiveness axioms à la McConway plus additional desiderata even for infinite electorates. On the basis of the theory of propositional-attitude aggregation, we argue that this is the most natural aggregation theory for probability measures. Our aggregation functionals for the case of infinite electorates are neither oligarchic nor integral-based and satisfy (at least) a weak anonymity condition. The delicate set-theoretic status of integral-based aggregation functionals for infinite electorates is discussed.
    Keywords: probabilistic opinion pooling, general aggregation theory, Richard Bradley, multiple priors, Arrow’s impossibility theorem, Bayesian epistemology, society of mind, finite anonymity, ultrafilter, measure problem, non-standard analysis
    JEL: D71 D81 C11
    Date: 2014–01
    Abstract: We propose a concept to study the stability of social and economic networks when players are farsighted and allocations are determined endogenously. A set of networks is a von Neumann-Morgenstern farsightedly stable set with bargaining if there exists an allocation rule and a bargaining threat such that (i) there is no farsighted improving path from one network inside the set to another network inside the set, (ii) from any network outside the set there is a farsighted improving path to some network inside the set, (iii) the value of each network is allocated among players so that players suffer or benefit equally from being linked to each other compared to the allocation they would obtain at their respective credible bargaining threat. We show that the set of strongly efficient networks is the unique von Neumann-Morgenstern farsightedly stable set with bargaining if the allocation rule is anonymous and component efficient and the value function is top convex. Moreover, the componentwise egalitarian allocation rule emerges endogenously.
    Keywords: Farsighted players, Stability, Equal bargaining power
    JEL: A14 C70 D20
    Date: 2014
  8. By: Winands, Sarah; Holm-Müller, Karin
    Abstract: The United Nations' Convention on Biological Diversity raised expectations of high benefits in genetic resource trade with megadiverse countries. As a reaction the Andean Community (CAN) passed strict community access legislation. Against this background the main objective of this paper is to investigate whether public eco-regional cartels of megadiverse countries on the genetic resource market can increase the appropriable benefits from biodiversity. We analyse how cartel design affects cartel benefits and discuss the benefit distribution among cartel members. As a case study we examine the CAN community access legislation (Decision 391) in the light of biodiversity collusion. Our main finding is that cartels-contrary to their negative connotation-are potentially able to stimulate genetic resource trade, increase the providers' appropriable benefits from biodiversity, and reduce the costs for customers. This depends largely on the cartel design and the ability to attract bioprospecting agents. A member's benefit share rises in the member's relative biodiversity richness and even more in the quality of the institutional environment. The CAN collusion nullifies its market power by a deterringly overly strict access regulation and a lack of internal cooperation.
    Keywords: cartel formation, genetic resource market, Andean Community, CBD, institutional analysis, Environmental Economics and Policy, Industrial Organization, Institutional and Behavioral Economics, International Relations/Trade, Political Economy, F53, K23, Q27, Q28, Q57,
    Date: 2014–01–30
  9. By: Rana, Arslan Tariq; Kebewar, Mazen
    Abstract: There is considerable debate whether the domestic political institutions (specifically, the country’s level of democracy) of the host developing country toward foreign investors are effective in establishing the credibility of commitments are still underway, researchers have also analyzed the effect of international institutions such as (GATT-WTO) membership and Bilateral Investment treaties (BIT) in their role of establishing the credibility of commitment to attract foreign investments. In addition, most recent studies have examined the effect of International Trade Agreements (TAs) on FDI flows as they contain separate investment chapters and dispute settlement mechanism, thus providing confidence to investor regarding the security of their investments. We argue that there are qualitative differences among various types of trade agreements and full-fledged trade agreements (FTA-CU) provide credibility to foreign investors and democracy level in the host country conditions this effect whereas the partial scope agreements (PSA) are not sufficient in providing credibility of commitments and not moderated by democracy. This paper analyses the impact of heterogeneous TAs, and their interaction with domestic institutions, on FDI inflows. Statistical analyses for 122 developing countries from 1970 to 2005 support this argument. The method adopted relies on fixed effects estimator which is robust to control endogeneity on a large panel dataset. The strict erogeneity of results by using a method suggested by Baier and Bergstrand (2007) and no feedback effect found in sample. The results state that (1) More the FTA-CU concluded, larger the amount of FDI inflows are attracted into the developing countries and PSA are insignificant in determining the FDI inflow; (2) FTA CU are complementary to democratic regime whereas the conditional effect of PSA with democracy on levels of FDI inflows is insignificant --
    Keywords: foreign direct investment,free trade agreements,partial scope agreements,domestic institutions
    JEL: F21 F55 F59
    Date: 2014–02–03
  10. By: Pannell, David J; Gibson, Fiona L
    Abstract: Decision makers responsible for the allocation of funds to environmental projects commonly use project scoring metrics that are not consistent with basic economic theory. As a result, there is often a loss of environmental benefits due to poor prioritisation of projects. The magnitudes of these losses are estimated for various metrics that deviate from theory. We examine cases where relevant variables are omitted from the benefits metric, project costs are omitted, and where parameters are weighted and added when they should be multiplied. Distributions of parameters are estimated from 129 environmental projects from Australia, New Zealand and Italy for which Benefit: Cost Analyses had previously been completed. The cost of using poor prioritisation metrics (in terms of lost environmental values) is often high – up to 80 per cent in the scenarios examined. The cost is greater where the budget is smaller. The most costly errors were found to be omitting information about environmental values, project costs or the effectiveness of management actions, and using a weighted additive decision metric for variables that should be multiplied. The latter three of these are errors that occur commonly in real-world decision metrics, often reducing potential environmental benefits by 30 to 50 per cent.
    Keywords: Cost Analysis, Prioritisation, Environmental program, Knapsack problem, Environmental Economics and Policy, Q50,
    Date: 2014–02–03
  11. By: Theodoros M. Diasakos (University of St. Andrews); Florence Neymotin (Nova Southeastern University)
    Abstract: In this analysis, we examine the relationship between an individual's decision to volunteer and the average level of volunteering in the community where the individual resides. Our theoretical model is based on a coordination game , in which volunteering by others is informative regarding the benet from volunteering. We demonstrate that the interaction between this information and one's private information makes it more likely that he or she will volunteer, given a higher level of contributions by his or her peers. We complement this theoretical work with an empirical analysis using Cen- sus 2000 Summary File 3 and Current Population Survey (CPS) 2004-2007 September supplement le data. We control for various individual and community characteristics, and employ robustness checks to verify the results of the baseline analysis. We addi- tionally use an innovative instrumental variables strategy to account for re ection bias and endogeneity caused by selective sorting by individuals into neighborhoods, which allows us to argue for a causal interpretation. The empirical results in the baseline, as well as all robustness analyses, verify the main result of our theoretical model, and we employ a more general structure to further strengthen our results.
    Keywords: stochastic coordination, volunteer work, public goods
    JEL: H4 D8
    Date: 2014–02–07
  12. By: Beckmann, Klaus (Helmut Schmidt University, Hamburg); Reimer, Lennart (Helmut Schmidt University, Hamburg)
    Abstract: Using examples for each type of model, we consider dynamic games, differential games, and simulation as alternative ways of extending the standard static economic model of conflict to study patterns of conflict dynamics. It turns out that computational requirements and theoretical difficulties impose tight limits on what can be achieved using the first two approaches. In particular, we are unable to study dynamic military conflict as a series of ``battles'' that are resolved individually. A simulation study based on a new model of adaptive, boundedly rational decision making, however, is shown not to be subject to this limitation. Plausible patterns of conflict dynamics emerge, which we can link to both historical conflict and standard tenets of military theory.
    Keywords: conflict; dynamics; contest success functions; differential games; dynamic games; simulation; emergence of war
    JEL: C72 D74
    Date: 2014–01–30
  13. By: Deng, Wendong; Hendrikse, George
    Abstract: This article highlights the interaction between social capital, pooling and quality premiums and their influence on cooperative members’ decisions regarding their product quality. A necessary condition for cooperative equitable principles such as complete pooling is that there exists a high level of social capital in the cooperative. When the level of social capital is high, the social motivation in the cooperative can guarantee high product quality while economic incentives are weak. When the level of social capital declines, an income rights structure with stronger quality incentives must be adopted by the cooperative to maintain the product quality. The cooperative is uniquely efficient when the farmers are risk averse and product quality is uncertain. When the level of social capital in cooperatives is higher than a threshold, which is decreasing in members’ subjective risk toward production uncertainty, cooperatives are able to achieve higher product quality than IOFs.
    Keywords: Quality, Social Capital, Cooperatives, Income Rights Structure, Agribusiness,
    Date: 2014
  14. By: Christopher Bruce (University of Calgary); Kaveh Madani
    Abstract: Collaborative negotiation has been widely-used for developing water policy. Nevertheless, a serious lacuna remains in our understanding of the factors that determine whether the negotiators in this bargaining process will be able to reach agreement. This paper argues that this failure results because the literature has focused on the process that is followed in negotiations, to the virtual exclusion of the substance of the issues that are to be resolved. As a consensus can only be reached concerning a change in policy if each party receives compensation for the concessions that it makes, a pre-condition for collaborative negotiation is that each party must have control over some asset that it can “trade†with the other parties. When this condition is met, we say that the process has “substance.†We identify a number of situations in which negotiations over water policy may possess this characteristic. However, we also argue that there is a large set of cases in which positive net gains are available, but in which at least one party lacks control over an asset that can be exchanged. In these cases, we investigate a number of government policies that could provide stakeholders with the necessary tradeable goods and, therefore, could impart substance to the process. These include: allowing negotiators to recommend changes in government regulations, giving stakeholders control over non-water related resources, and establishing funds that could be drawn on by collaborators. Many situations still remain, however, in which collaboration will lack substance and stakeholders can be expected to seek alternative means for pursuing their goals or waste their effort in endless bargaining.
    Date: 2014–02–03
  15. By: Kai Lessmann (Potsdam Institute for Climate Impact Research (PIK)); Ulrike Kornek (Potsdam Institute for Climate Impact Research (PIK)); Valentina Bosetti (Università Bocconi and Fondazione Eni Enrico Mattei (FEEM)); Rob Dellink (Environmental Economics and Natural Resources Group, Department of Economics, Wageningen University); Johannes Emmerling (Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC)); Johan Eyckmans (KU Leuven – Center for Economics and Corporate Sustainability (CEDON)); Miyuki Nagashima (Research Institute of Innovative Technology for the Earth); Hans-Peter Weikard (Environmental Economics and Natural Resources Group, Department of Economics, Wageningen University); Zili Yang (Department of Economics, State University of New York at Binghamton)
    Abstract: In this paper we report results from a comparison of numerically calibrated game theoretic integrated assessment models that explore stability and performance of international coalitions for climate change mitigation. Specifically, by means of this ensemble of models we are able to identify robust results concerning incentives of nations to commit themselves to a climate agreement, and to estimate what stable agreements can achieve in terms of greenhouse gas mitigation. We also assess the potential of transfers that redistribute the surplus of cooperation in order to foster stability of climate coalitions. In contrast to much of the existing analytical game theoretical literature, we find substantial scope for self-enforcing climate coalitions in most models that close much of the abatement and welfare gap between complete absence of cooperation and full cooperation. This more positive message follows from the use of transfer schemes that are designed to counteract free riding incentives.
    Keywords: Coalition Stability, International Environmental Agreements, Numerical modeling, Transfers
    JEL: Q5 Q58 C7

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