New Economics Papers
on Collective Decision-Making
Issue of 2014‒05‒09
thirteen papers chosen by
Stan C. Weeber, McNeese State University

  1. The Size of Local Legislatures and Women's Political Representation: Evidence from Brazil By Gabriel Correa; Ricardo A. Madeira
  2. Electoral Competition through Issue Selection By Micael Castanheira De Moura; Marco Giani; Enriqueta Aragonès
  3. Team Reasoning as a Guide to Coordination By Lahno, Amrei Marie; Lahno, Bernd
  4. The 2000 presidential election and the information cost of sensitive versus By Yan He; Hai Lin; Chunchi Wu; Uric B. Dufrene
  5. Exogenous vs. endogenous governance in innovation communities: Effects on motivation, conflict and justice - An experimental investigation By Störmer, Niclas; Herstatt, Cornelius
  6. To Give and Get: Poverty Alleviation as A Local Public Good By Michael Dorsch; Brett Graham
  7. Public expenditure distribution, voting, and growth By Lorenzo Burlon
  8. Teaching economy and education for citizenship in the Euro Mediterranean area By Olga Bombardelli
  9. Conforming to Group Norms: An Experimental Study By Gautam Bose; Lorraine Ivancic; Evgenia Dechter
  10. Unhappily non-cooperative: Do development research and practice ignore each other? By Kleemann, Linda; Neumann, Maximilian
  11. Efficiency and benchmarking with directional distances. A data driven approach By Cinzia Daraio; LŽopold Simar
  12. Acquisition Premiums of Executive Compensation in China: a Matching View By Kang, Lili; Peng, Fei
  13. Uncertainty Aversion and a Theory of Incomplete Contract By Chenghu Ma

  1. By: Gabriel Correa; Ricardo A. Madeira
    Abstract: Exploiting the exogenous changes in local legislature size at certain population thresholds in Brazil, this paper investigates whether the number of legislators can impact the political participation of women, a group that is extremely underrepresented in Brazilian politics. The results suggest that the number of seats in the legislature has a significant positive impact on women's presence in the political sphere, and we show that these effects are direct consequences of changes in local political competition. We also report that the representation of women in the decision-making process influences the municipal provision of public goods and services.
    Keywords: Legislature Size; Women’s Political Representation; Regression Discontinuity Design.
    JEL: D72 D78 H41
    Date: 2014–04–23
  2. By: Micael Castanheira De Moura; Marco Giani; Enriqueta Aragonès
    Date: 2014–04–17
  3. By: Lahno, Amrei Marie; Lahno, Bernd
    Abstract: A particular problem of traditional Rational Choice Theory is that it cannot explain equilibrium selection in simple coordination games. In this paper we analyze and discuss the solution concept for common coordination problems as incorporated in the theory of Team Reasoning (TR). Special consideration is given to TR’s concept of opportunistic choice and to the resulting restrictions in using private information. We report results from a laboratory experiment in which teams were given a chance to coordinate on a particular pattern of behavior in a sequence of HiLo games. A modification of the stage game offered opportunities to improve on the team goal through changing this accustomed pattern of behavior. Our observations throw considerable doubt on the idea of opportunistic team reasoning as a guide to coordination. Contrary to what TR would predict, individuals tend to stick to accustomed behavioral patterns. Moreover, we find that individual decisions are at least partly determined by private information not accessible to all members of a team. Alternative theories of choice, in particular cognitive hierarchy theory may be more suitable to explain the observed pattern of behavior.
    Keywords: team reasoning, collective agency, coordination, opportunistic choice, laboratory experiment.
    JEL: C91 C92 D03 D70
    Date: 2014–04–01
  4. By: Yan He; Hai Lin; Chunchi Wu; Uric B. Dufrene
    Abstract: We investigate the information cost of stock trading during the 2000 presidential election. We find that the uncertainty of the election induces information asymmetry of politically sensitive firms under the Bush/Gore platforms. The unusual delay in election results in a significant increase in the adverse selection component of trading cost of politically sensitive stocks. Cross-sectional variations in bid-ask spreads are significantly and positively related to changes in information cost, controlling for the effects of liquidity cost and stock characteristics. This empirical evidence is robust to different estimation methods.
    Keywords: Presidential election; information asymmetry; transaction costs; bid-ask spreads; adverse selection cost
    JEL: G0 G14
    Date: 2013–10–14
  5. By: Störmer, Niclas; Herstatt, Cornelius
    Abstract: In this study we examine the effects of exogenous vs. endogenous governance rules on a virtual community handling an innovative task. Specifically we investigate the relationship between the two modes (exogenous vs. endogenous) and factors such as motivation, conflict and justice. We conducted an experiment with 70 students, divided into teams of five. We manipulated procedural legitimacy by allowing one group to choose a set of rules and giving the other group the same rules exogenously. Our study indicates, that letting a team choose its own governance rules leads to increasing level of conflict negatively impacting motivation. --
    Keywords: Governance,Collaborative Innovation Communities
    Date: 2014
  6. By: Michael Dorsch; Brett Graham
    Abstract: The paper theoretically analyzes the public choice of transfer payments to the poor (welfare spending) by modeling poverty alleviation as a public good provided by local governments. Voters that are not welfare recipients support welfare spending out of self-interest, rather than altruism, due to the public good property of poverty alleviation. Equilibrium policies are then analyzed according to characteristics of localities, such as population density and income inequality. More generally, our paper provides a technique to solve certain multiple peak problems that arise when a public goods policy has an explicitly redistributive component. To provide empirical support for our model, we use county-level demographic and government expenditure data from the United States Census.
    Keywords: collective choice, poverty policy, public goods
    JEL: D72 H75
    Date: 2013–10–14
  7. By: Lorenzo Burlon (Bank of Italy)
    Abstract: In this paper we study why the misallocation of resources across different productive sectors tends to persist over time. To this end we propose a general equilibrium model that delivers two structural relations. On the one hand, the public expenditure distribution influences the future sectoral composition of the economy; on the other, the distribution of vested interests across sectors determines public policy decisions. The model predicts that different initial sectoral compositions entail different future streams of public expenditure and therefore different development paths.
    Keywords: public expenditure, sectoral composition, vested interests, economic growth
    JEL: O41 O43
    Date: 2014–04
  8. By: Olga Bombardelli
    Abstract: This paper deals with teaching economy and promoting education for citizenship in the schools, starting from the premise that education is linked to the development of the society, and should increase awareness of people for the social, cultural, economic and political questions, in the current interdependent world. This essay moves from the premises that education for citizenship, in both formal and non formal and informal way, is helpful in order to foster awareness and engagement, and that competent citizens together can influence decision making in cultural, political and economic sectors.
    Date: 2014–03
  9. By: Gautam Bose (School of Economics, Australian School of Business, the University of New South Wales); Lorraine Ivancic (School of Economics, Australian School of Business, the University of New South Wales); Evgenia Dechter (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: There is substantial experimental and empirical evidence to suggest that individual behaviour in bilateral or small-group interactions is affected by social norms. Further, social norms vary according to context. Previous research largely focuses on norms of fairness, not norms per se. We design an experiment to decouple norm-adherence from fairness. We find that (a) a group norm evolves and individuals cluster more tightly around it as they learn the average behaviour of the group, (b) actions further from this norm in a self-serving direction are less acceptable by others, and (c) when an agent is moved to a group with a different norm, s/he conforms quickly to the new norm.
    Keywords: group behaviour, norms, conformism, fairness, ultimatum game
    JEL: C72 C78 C92 Z13
    Date: 2014–04
  10. By: Kleemann, Linda; Neumann, Maximilian
    Abstract: Successful cooperation between development researchers and development policy makers and practitioners translates into better development policies, projects and programmes. Research is relevant if it can provide meaningful input for the practitioners. At the same time, practitioners have to be willing and able to use these findings to improve their work. Through continuous communication, evaluation and feedback cycles both parties should be able to gain additional insights and improve future outcomes. But how close is reality to this ideal state of collaboration between theory and practice? Development researchers are often said to be working in ivory towers - doing research for the sake of publications with results that are hardly relevant or applicable in practice. But is this necessarily so and is it the only reason for the lack of cooperation between research and practice? What role do personal communication, time horizons and the researchers fear of losing their academic reputation play? To answer this question, we developed two surveys, one among development researchers and one among development practitioners in Germany, asking them about the intensity and quality of cooperation and feedback linkages between research and practice. We also asked about the main obstacles and the expectations about the future of cooperation between the two groups. The questionnaires were published on the PEGNet website and contained 27 questions. The researcher questionnaire was sent to about 2000 development researchers in Germany and abroad in early 2014. Within three weeks 145 researchers answered the questionnaire. The practitioner questionnaire was distributed in 2013 (Kleemann and Böhme 2013). Although the results are not representative for the development research sector as a whole they provide some interesting insights into existing problems and what can be done about them. The results show that both researchers and practitioners are interested in cooperating more. Researchers in particular believe that better collaboration would be mutually beneficial, resulting in additional insights for their research and better development outcomes. From their point of view the current state of cooperation is unsatisfactory because of four main reasons: different interests, different time frames, poor communication and mistrust. The practitioners and researchers opinion on the main obstacles for cooperation coincide to a large extent, and in particular on the question of timing. Practitioners complain about the slowness of research wherefore they have to make decisions before the researchers can provide them with their findings (Bell and Squire 2014). Moreover, practitioners claim that researchers are mainly aiming at publishing their results and are therefore neglecting the applicability of their research. Hence, in order to improve the cooperation environment researchers and practitioners have to learn how to trust and respect each other, to communicate better and to find ways to handle differences in timing. --
    Date: 2014
  11. By: Cinzia Daraio (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); LŽopold Simar (Institute of Statistics, Biostatistics et Actuarial Sciences, Universite' Catholique de Louvain, Louvain-la-Neuve, Belgium)
    Abstract: In efficiency analysis the assessment of the performance of Decision Making Units (DMUs) relays on the selection of the direction along which the distance from the efficient frontier is measured. Directional Distance Functions (DDFs) represent a flexible way to gauge the inefficiency of DMUs. Permitting the selection of a direction towards the efficient frontier is often useful in empirical applications. As a matter of fact, many papers in the literature have proposed specific DDFs suitable for different contexts of application. Nevertheless, the selection of a direction implies the choice of an efficiency target which is imposed to all the analyzed DMUs. Moreover, there exist many situations in which there is no a priori economic or managerial rationale to impose a subjective efficiency target. In this paper we propose a data-driven approach to find out an ÒobjectiveÓ direction along which to gauge the inefficiency of each DMU. Our approach permits to take into account for the heterogeneity of DMUs and their diverse contexts that may influence their input and/or output mixes. Our method is also a data driven technique for benchmarking each DMU. We describe how to implement our framework and illustrate its usefulness with simulated and real datasets.
    Keywords: DEA, benchmarking, directional distance functions, nonparametric estimation, heterogeneity, performance, productivity, organizational studies
    Date: 2014
  12. By: Kang, Lili; Peng, Fei
    Abstract: More aggressive acquiring firms paid higher executive compensation than non or less aggressive acquiring firms. This paper applies the generalized propensity score (GPS) methodology to estimate the relationship between a firm’s acquisition and its executive compensation. Allowing for continuous treatment, that is, different levels of the firms’ acquisition activities, we apply the GPS method on a panel data set of Chinese Public Listed Companies (PLCs) and find that there is a causal effect of firms’ acquisition activities on executive compensation. However, there is a divergent interests between the board directors and executive managers which may bring serious agency problem in the acquisition decision. The self-selection effect plays a dominant role in the acquisition premiums of top 3 board directors, while the learning-by-acquiring effect on compensation is more prominent for executive managers than board directors. As the executive managers as a whole, can benefit more executive management positions as well as higher growth of executive compensation from aggressive acquisition than board directors and top 3 executive managers.
    Keywords: Acquisition Decision; Executive Compensation; Generalized Propensity Score; Agency problem
    JEL: C14 G34 J33 M12
    Date: 2014–04
  13. By: Chenghu Ma
    Abstract: This paper is to provide a theoretical foundation of incomplete contract in an extensive game of multi-agent interaction. It aims to explain why rational agents may agree upon incomplete contracts even though it is costless to sign a complete one. It is argued that an incomplete contract creates strategic uncertainty. If agents' attitudes toward uncertainty are not neutral, then an incomplete contract as final solution can be the consequence of common knowledge of rationality. This paper assumes that all agents are uncertainty averse in a sense of Gilboa and Schmeidler (1989); and that agents can form coalitions as part of strategic play. All these are embedded into a newly proposed equilibrium solution concept for extensive form game of perfect information.
    Keywords: uncertainty aversion, strategic uncertainty, coalition-formation, stability and core-criterion.
    JEL: C70 C71 C72
    Date: 2013–10–14

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