New Economics Papers
on Collective Decision-Making
Issue of 2014‒06‒14
nineteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Mr. Rossi, Mr. Hu and Politics: The Role of Immigration in Shaping Natives' Political Preferences By Barone, Guglielmo; D'Ignazio, Alessio; de Blasio, Guido; Naticchioni, Paolo
  2. Voting power in the Electoral College: The noncompetitive states count, too By Brams, Steven J; Kilgour, D. Marc
  4. From Rome to Lisbon and Beyond: Member States' Power, Efficiency, and Proportionality in the EU Council of Ministers By Nikolaos Antonakakis; Harald Badinger; Wolf Heinrich Reuter
  5. Other-regarding behavior under collective action By Sherstyuk, Katerina; Tarui, Nori; Wengrin, Melinda Podor; Viloria, Jay; Saijo, Tatsuyoshi
  6. A Politico-economic Approach on Public Debt in an Endogenous Growth Economy By Arai, Real; Naito, Katsuyuki
  7. Constitutions and Social Networks By Ana Mauleon; Nils Roehl; Vincent Vannetelbosch
  8. A hybrid game with conditional and unconditional veto power By Werner Güth; M. Vittoria Levati; Natalia Montinari; Chiara Nardi
  9. Measuring Polarization in Preferences By Burak Can; Ali Ihsan Ozkes; Ton Storcken
  10. A Conceptual Framework for Data-Driven Decision Making. By Brian Gill; Brandon Coffee-Borden; Kristin Hallgren
  11. Crime and Punishment the British way: Accountability Channels Following the MPs’ Expenses Scandal By Valentino Larcinese; Indraneel Sircar
  12. Uncertainty and Conflict Decision By Natasa Bilkic; Thomas Gries
  13. Centralized vs. Decentralized Wage Formation: The Role of Firms' Production Technology By Hirsch, Boris; Merkl, Christian; Müller, Steffen; Schnabel, Claus
  14. Can Interaction be the Primary Focus of In-group Biases? By David Johnson; Robert Oxoby
  15. Agreeing on robust decisions : new processes for decision making under deep uncertainty By Kalra, Nidhi; Hallegatte, Stephane; Lempert, Robert; Brown, Casey; Fozzard, Adrian; Gill, Stuart; Shah, Ankur
  16. Beliefs dynamics in communication networks By Azomahou T.T.; Opolot D.
  17. Peer effects and social preferences in voluntary cooperation By Simon Gächter; Christian Thöni
  18. Stability and strategic diffusion in networks By Azomahou T.T.; Opolot D.
  19. Wisdom or Madness? Comparing Crowds with Expert Evaluation in Funding the Arts By Ethan Mollick; Ramana Nanda

  1. By: Barone, Guglielmo (Bank of Italy); D'Ignazio, Alessio (Bank of Italy); de Blasio, Guido (Bank of Italy); Naticchioni, Paolo (University of Rome 3)
    Abstract: We analyze the impact of immigration on voting. Using Italian municipality data and IV estimation strategy, we find that immigration generates a sizable causal increase in votes for the centre-right coalition, which has a political platform less favorable to immigrants. Additional findings are: big cities behave differently, with no impact of immigration on electoral outcomes; gains in votes for the centre-right coalition correspond to loss of votes for the centre-left parties, a decrease in voter turnout, and a rise in protest votes; cultural diversity, competition in the labor market and for public services are the most relevant channels at work.
    Keywords: immigration, voting, political economy
    JEL: D72 P16 J61
    Date: 2014–05
  2. By: Brams, Steven J; Kilgour, D. Marc
    Abstract: In U.S. presidential elections, voters in noncompetitive states seem not to count—and so have zero voting power, according to the Banzhaf and other voting-power indices—because they cannot influence the outcome in their states. But because the electoral votes of these states are essential to a candidate's victory, it seems that they do count, but in a different way. We measure the power of voters in noncompetitive states by modeling how these states structure the contest in the competitive states, as illustrated in the 2012 election. Barack Obama’s lead of 46 electoral votes over Mitt Romney in the 41 noncompetitive states and the District of Columbia gave him 5.5 times as many ways of winning in the 9 competitive states as Romney had. Also, Romney’s winning coalitions were weaker by two additional measures: They were 2.4 times more vulnerable, and 5.5 times more fragile than Obama’s. Compared with being tied with Romney in the noncompetitive states, Obama’s lead in these states contributed very substantially to his victory.
    Keywords: US presidential elections; Electoral College; voting power
    JEL: C71 C78 D63
    Date: 2014–05
  3. By: Emin Dinlersoz; Jeremy Greenwood; Henry Hyatt
    Abstract: What type of businesses do unions target for organizing and when? A dynamic model of the union organizing process is constructed to answer this question. A union monitors establishments in an industry to learn about their productivity, and decides which ones to organize and when. An establishment becomes unionized if the union targets it for organizing and wins the union certification election. The model predicts two main selection e?ects: unions target larger and more productive establishments early in their life-cycles, and among the establishments targeted, unions are more likely to win elections in smaller and less productive ones. These predictions find support in union certification elections data for 1977-2007 matched with data on establishment characteristics.
    Keywords: Unionization, Union Organizing, Union Certification Election, Diffusion of Unionization, Bayesian Learning, Productivity.
    JEL: J5 J50 J51 L11 L23 L25 L6 D24 D21
    Date: 2014–02
  4. By: Nikolaos Antonakakis (Department of Economics, Vienna University of Economics and Business; Department of Economics and Finance, University of Portsmouth); Harald Badinger (Department of Economics, Vienna University of Economics and Business; Austrian Institute of Economic Research (WIFO)); Wolf Heinrich Reuter (Department of Economics, Vienna University of Economics and Business)
    Abstract: This paper provides a comprehensive assessment of the evolution of EU member states' power, the EU's capability to act (efficiency), and the proportionality of the voting system in the Council of Ministers from the treaties of Rome in 1958 till the Treaty of Lisbon in 2009 and beyond, using a wide range of alternative power indices. Moreover, it considers explicitly the relevance of additional legal provisions (such as the 'Luxembourg Compromise', the 'Demographic Clause', and the 'Ioannina Compromise') and the implications of novel, more recently introduced voting rules such as reverse qualified majority voting.
    Keywords: Council, Enlargement, Efficiency, EU, Member States, Power Index
    JEL: D72 K33 E61
    Date: 2014–05
  5. By: Sherstyuk, Katerina; Tarui, Nori; Wengrin, Melinda Podor; Viloria, Jay; Saijo, Tatsuyoshi
    Abstract: In many collective action settings, such as decisions on public education or climate change mitigation, actions of a group have welfare consequences for themselves as well as their followers. We conduct laboratory experiments with two-stage predecessor-follower prisoners' dilemma and coordination games with dynamic externalities to study whether concerns for the followers' welfare affect the predecessors' behavior. We find that predecessors often give up own payoffs to avoid imposing negative externalities on the followers, but not to generate positive externalities for the followers. A concern for the followers aligned with own group payoff maximization motive helps to resolve social dilemma and coordination problems; yet, a conflict in motives greatly exacerbates both free-riding and coordination on the payoff-inferior equilibrium. We also find strong evidence of social learning: the followers tend to blindly mimic their own predecessor, but act opposite to their match's predecessor, no matter whether these actions are welfare-improving or not.
    Keywords: economic experiments, other-regarding behavior, collective action
    JEL: C90 C73
    Date: 2014–05
  6. By: Arai, Real; Naito, Katsuyuki
    Abstract: We consider an overlapping generations closed economy in which a government finances the cost of public good provision by labor income taxation and/or public debt issuance. The size of these public policies is determined in a repeated probabilistic voting game. We investigate the characteristics of a Markov perfect politico-economic equilibrium in which the size of public policies depends on both the stock of public debt and the level of physical capital, and show that individuals' stronger preferences for public good provision tighten fiscal discipline and promote economic growth.
    Keywords: public debt; probabilistic voting; Markov perfect equilibrium; economic growth
    JEL: D72 H41 H63 O43
    Date: 2014–05–27
  7. By: Ana Mauleon (Saint-Louis University — Brussels); Nils Roehl (University of Paderborn); Vincent Vannetelbosch (CORE, University of Louvain)
    Abstract: The objective of the paper is to analyze the formation of social networks where individuals are allowed to engage in several groups at the same time. These group structures are interpreted here as social networks. Each group is supposed to have specific rules or constitutions governing which members may join or leave it. Given these constitutions, we consider a social network to be stable if no group is modified any more. We provide requirements on constitutions and players’ preferences under which stable social networks are induced for sure. Furthermore, by embedding many-to-many matchings into our setting, we apply our model to job markets with labor unions. To some extent the unions may provide job guarantees and, therefore, have influence on the stability of the job market.
    Keywords: Social networks, Constitutions, Stability, Many-to-Many Matchings.
    JEL: C72 C78 D85
    Date: 2014–01
  8. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); M. Vittoria Levati (Max Planck Institute of Economics, Jena, and DSE, University of Verona); Natalia Montinari (Economics Department, Lund University); Chiara Nardi (Max Planck Institute of Economics, Jena, and DSE, University of Verona)
    Abstract: In the hybrid game, one proposer confronts two responders with veto power: one responder can condition his decisions on his own offer but the other cannot. We vary what the informed responder knows about the offers as well as the uninformed responder's conflict payoff. Neither variation affects behavior: proposers always favor informed responders, who frequently accept minimal offers.
    Keywords: Ultimatum, Yes/No game
    JEL: C72 C92
    Date: 2014–05–14
  9. By: Burak Can (School of Business and Economics, Maastricht University - Department of Economics); Ali Ihsan Ozkes (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, Department of Economics, Bilgi University - Istanbul Bilgi University); Ton Storcken (Department of Quantitative Economics, Maastricht University - (-))
    Abstract: In this paper, we study the measurement of polarization in collective decision making problems with ordinal preferences over alternatives. We argue that polarization can be measured as an aggregation of antagonisms over pairs of alternatives in the society. We propose a measure of this sort and show that it is the only measure satisfying some normatively appealing conditions.
    Date: 2014–06–02
  10. By: Brian Gill; Brandon Coffee-Borden; Kristin Hallgren
    Keywords: Conceptual Framework, Data Driven Decision Making, Education
    JEL: I
    Date: 2014–06–02
  11. By: Valentino Larcinese; Indraneel Sircar
    Abstract: Does democracy make politicians accountable? The UK expenses scandal of May 2009 constitutes an ideal setting to answer this question, since it allows credible ceteris paribus comparisons. We show that scandal-related press coverage significantly increased the probability of an MP to retire, reduced vote shares of standing MPs, but did not decrease their re-election probability. We also show that punishment was directed to individual MPs involved in the scandal rather than their parties. An objective monetary measure of malfeasance from an official report explains press coverage but has no independent effect on MPs’ retirement or vote shares. We show that voters perceive co-partisan MPs to be less involved than other MPs. Finally we analyse coverage of the scandal by seven national newspapers and conclude that the press worked as a watchdog by focussing on the government and on frontbenchers of the main opposition party, with little role for ideological leanings. Our study also uncovers a substantial gender bias: ceteris paribus, female MPs received more media attention and, for the same level of media attention, were more likely to stand down.
    Date: 2014
  12. By: Natasa Bilkic (University of Paderborn); Thomas Gries (University of Paderborn)
    Abstract: Though violent conflicts bear dramatic uncertainties, there is no closed theory addressing large uncertainties in conflict decisions. If a violent conflict is an investment in social, political, or economic change for rebels, how do large uncertainties like threatening waves of persecution affect their decision to turn violent? In order to capture such discontinuous uncertain large stochastic shocks we apply a real option model and introduce a more general stochastic process than the often used geometric Brownian motion, namely an Ito-Lévy Jump Diffusion processes. A major result is that large uncertain shocks have opposite effects on the decision to launch a conflict than small variations, indicated by normal volatility. While an increase in volatility of e.g. general economic conditions, indicated by (marginal) volatility, would give hope and postpone a potential attack, more uncertain large threats, indicated by discontinuous negative shock, will lead to an earlier outbreak of conflict. Hence, in latent conflicts, either general disaster shocks, or even deliberately announced oppressive threats by a government, often meant to awe the oppressed group, may provoke a violent outbreak, if the threat is strong enough.
    Keywords: theory of social conflict, decision under uncertainty, non-marginal stochastic shocks
    JEL: D74 D81 C61
    Date: 2014–02
  13. By: Hirsch, Boris (University of Erlangen-Nuremberg); Merkl, Christian (University of Erlangen-Nuremberg); Müller, Steffen (University of Erlangen-Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg)
    Abstract: This paper is the first to show theoretically and empirically how firms' production technology affects the choice of their preferred wage formation regime. Our theoretical framework predicts, first, that the larger the total factor productivity of a firm, the more likely it is to opt for centralized wage formation where it can hide behind less productive firms. Second, the larger a firm's scale elasticity, the higher its incentive to choose centralized rather than decentralized wage setting due to labor cost and straitjacket effects. As firms in Germany are allowed to choose their wage formation regime, we test these two hypotheses with representative establishment data for West Germany. We find that establishments with centralized bargaining agreements indeed have economically and statistically significantly larger total factor productivities and scale elasticities than comparable establishments outside the centralized bargaining regime.
    Keywords: collective bargaining, bargaining coverage, Germany
    JEL: J50
    Date: 2014–06
  14. By: David Johnson (University of Calgary); Robert Oxoby (University of Calgary)
    Abstract: Previous work on group identity in economics has demonstrated behavior consistent with in-group favoritism: individuals are more generous to members of their own group in comparison to members of other groups. We present an experiment in which we seek to identify if in-group favoritism is driven by a desire to be more generous to in-group members or rather eschew interacting with out-group members. Our results demonstrate that individuals do not necessarily behave differently when interacting with in-group or out-group members in a simple ultimatum game. Rather, many individuals are willing to incur a cost to ensure interacting with an in-group member. Surprisingly this discrimination does not result in larger ultimatum game offers, but results in increased levels of reported happiness with resultant outcomes.
    Keywords: experiments, identity, happiness
    JEL: C9 D1 M5
    Date: 2014–05–29
  15. By: Kalra, Nidhi; Hallegatte, Stephane; Lempert, Robert; Brown, Casey; Fozzard, Adrian; Gill, Stuart; Shah, Ankur
    Abstract: Investment decision making is already difficult for any diverse group of actors with different priorities and views. But the presence of deep uncertainties linked to climate change and other future conditions further challenges decision making by questioning the robustness of all purportedly optimal solutions. While decision makers can continue to use the decision metrics they have used in the past (such as net present value), alternative methodologies can improve decision processes, especially those that lead with analysis and end in agreement on decisions. Such"Agree-on-Decision"methods start by stress-testing options under a wide range of plausible conditions, without requiring us to agree ex ante on which conditions are more or less likely, and against a set of objectives or success metrics, without requiring us to agree ex ante on how to aggregate or weight them. As a result, these methods are easier to apply to contexts of large uncertainty or disagreement on values and objectives. This inverted process promotes consensus around better decisions and can help in managing uncertainty. Analyses performed in this way let decision makers make the decision and inform them on (1) the conditions under which an option or project is vulnerable; (2) the tradeoffs between robustness and cost, or between various objectives; and (3) the flexibility of various options to respond to changes in the future. In doing so, they put decision makers back in the driver's seat. A growing set of case studies shows that these methods can be applied in real-world contexts and do not need to be more costly or complicated than traditional approaches. Finally, while this paper focuses on climate change, a better treatment of uncertainties and disagreement would in general improve decision making and development outcomes.
    Keywords: Climate Change Economics,Climate Change Mitigation and Green House Gases,Science of Climate Change,Transport Economics Policy&Planning,Debt Markets
    Date: 2014–06–01
  16. By: Azomahou T.T.; Opolot D. (UNU-MERIT)
    Abstract: We study the dynamics of individual beliefs and information aggregation when agents communicate via a social network. We provide a general framework of social learning that captures the interactive effects of three main factors on the structure of individual beliefs resulting from such a dynamic process; that is historical factorsprior beliefs, learning mechanismsrational and bounded rational learning, and the topology of communication structure governing information exchange. More specifically, we provide conditions under which heterogeneity and consensus prevail. We then establish conditions on the structures of the communication network, prior beliefs and private information for public beliefs to correctly aggregate decentralized information. The speed of learning is also established, but most importantly, its implications on efficient information aggregation. Keywords Learning, social networks, public beliefs, speed of learning, information aggregation.
    Keywords: Game Theory and Bargaining Theory: General; Search; Learning; Information and Knowledge; Communication; Belief; Network Formation and Analysis: Theory;
    JEL: C70 D83 D85
    Date: 2014
  17. By: Simon Gächter (School of Economics, University of Nottingham); Christian Thöni (Centre Walras-Pareto, University of Lausanne)
    Abstract: Social preferences and social influence effects (“peer effectsâ€) are well documented, but little is known about how peers shape social preferences. Settings where social preferences matter are often situations where peer effects are likely too. In a gift-exchange experiment with independent payoffs between two agents we find causal evidence for peer effects. Efforts are positively correlated but with a kink: agents follow a low-performing but not a high-performing peer. This contradicts major theories of social preferences which predict that efforts are unrelated, or negatively related. Some theories allow for positively-related efforts but cannot explain most observations. Conformism, norm following and social esteem are candidate explanations.
    Keywords: social preferences, voluntary cooperation, peer effects, reflection problem, gift-exchange; conformism; social norms; social esteem, experiments.
    Date: 2014–03
  18. By: Azomahou T.T.; Opolot D. (UNU-MERIT)
    Abstract: Learning and stochastic evolutionary models provide a useful framework for analyzing repeated interactions and experimentation among economic agents over time. They also provide sharp predictions about equilibrium selection when multiplicity exists. This paper defines three convergence measures, diffusion rate, expected waiting time and convergence rate, for characterizing the short-run, medium-run and long-run behavior of a typical model of stochastic evolution. We provide tighter bounds for each without making restrictive assumptions on the model and amount of noise as well as interaction structure. We demonstrate how they can be employed to characterize evolutionary dynamics for coordination games and strategic diffusion in networks. Application of our results to strategic diffusion gives insights on the role played by the network topology. For example we show how networks made up of cohesive subgroups speed up evolution between quasi-stable states while sparsely connected networks have the opposite effect of favoring almost global stability. Keywords Learning and evolution, networks, diffusion rate, convergence rate, expected waiting time
    Keywords: Stochastic and Dynamic Games; Evolutionary Games; Repeated Games; Information, Knowledge, and Uncertainty: General;
    JEL: C73 D80
    Date: 2014
  19. By: Ethan Mollick (The Wharton School University of Pennsylvania); Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: In fields as diverse as technology entrepreneurship and the arts, crowds of interested stakeholders are increasingly responsible for deciding which innovations to fund, a privilege that was previously reserved for a few experts, such as venture capitalists and grant-making bodies. Little is known about the degree to which the crowd differs from experts in judging which ideas to fund, and, indeed, whether the crowd is even rational in making funding decisions. Drawing on a panel of national experts and comprehensive data from the largest crowdfunding site, we examine funding decisions for proposed theater projects, a category where expert and crowd preferences might be expected to differ greatly. We instead find substantial agreement between the funding decisions of crowds and experts. Where crowds and experts disagree, it is far more likely to be a case where the crowd is willing to fund projects that experts may not. Examining the outcomes of these projects, we find no quantitative or qualitative differences between projects funded by the crowd alone, and those that were selected by both the crowd and experts. Our findings suggest that the democratization of entry that is facilitated by the crowdfunding has the potential to lower the incidence of “false negatives,” by allowing projects the option to receive multiple evaluations and reach out to receptive communities that may not otherwise be represented by experts.
    Date: 2014–05

This issue is ©2014 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.