nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2014‒08‒25
sixteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Collective choices under ambiguity By M. Vittoria Levati; Stefan Napel; Ivan Soraperra
  2. Guns and Votes By Bouton, Laurent; Conconi, Paola; Pino, Francisco; Zanardi, Maurizio
  3. Markovian Elections By Jean Guillaume Forand; John Duggan
  4. Politics Before Pupils? Electoral Cycles and School Resources in India By Fagernäs, Sonja; Pelkonen, Panu
  5. Constitutions and Social Networks By Ana Mauleon; Nils Roehl; Vincent Vannetelbosch
  6. Chairship system and decision making by consensus in international agreements : the case of ASEAN By Suzuki, Sanae
  7. Contagious Synchronization and Endogenous Network Formation in Financial Networks By Christoph Aymanns and Co-Pierre Georg
  8. Forward Guidance or Cacophony By Gamze Demiray; Yasin Kursat Onder; Ibrahim Unalmis
  9. “What an Ungrateful Lot They Are: The Electoral Impact of Federal Budgets” By Davis, Brent
  10. Peering into the mist: social learning over an opaque observation network By Barrdear, John
  11. Democratisation in Africa: The Role of Self-Enforcing Constitutional Rules By Sophia du Plessis, Ada Jansen and Krige Siebrits
  12. How Monetary Policy is Made: Two Canadian Tales By Pierre L. Siklos, Matthias Neuenkirch
  13. Armenia : Sustainable and Strategic Decision Making in Mining By World Bank
  14. James Buchanan's theory of federalism: From fiscal equity to the ideal political order By Feld, Lars P.
  15. Employers' Preference for Discrimination By Sue H. Mialon; Seung Han Yoo
  16. Trust and European-Russian Energy Cooperation: The Case of Oil and Gas Partnerships and Long-term Contracts By Marc Ozawa

  1. By: M. Vittoria Levati (University of Verona and Max Planck Institute of Economics, Jena); Stefan Napel (University of Bayreuth); Ivan Soraperra (University of Verona)
    Abstract: We investigate experimentally whether collective choice matters for individual attitudes to ambiguity. We consider a two-urn Ellsberg experiment: one urn offers a 45% chance of winning a fixed monetary prize, the other an ambiguous chance. Participants choose either individually or in groups of three. Group decision rules vary. In one treatment the collective choice is taken by majority; in another it is dictated by two group members; in the third it is dictated by a single group member. We observe high proportions of ambiguity averse choices in both individual and collective decision making. Although a majority of participants display consistent ambiguity attitudes across their decisions, collective choice tends to foster ambiguity aversion, especially if the decision rule assigns asymmetric responsibilities to group members. Previous participation in laboratory experiments may miti- gate this.
    Keywords: Ambiguity aversion, majority voting, dictatorship
    JEL: C91 C92 D71 D81
    Date: 2014–08–19
  2. By: Bouton, Laurent; Conconi, Paola; Pino, Francisco; Zanardi, Maurizio
    Abstract: Why are U.S. congressmen reluctant to support gun control regulations, despite the fact that most Americans are in favor of them? We argue that re-election motives can help explain why politicians often take a pro-gun stance against the interests of the majority of the electorate. We describe a model in which an incumbent politician must decide on a primary issue, which is more important to a majority of voters, and a secondary issue, which a minority cares more intensely about. We derive conditions under which the politician, when approaching re-election, will pander towards the interests of the minority on the secondary issue. To assess the evidence, we exploit the staggered structure of the U.S. Senate— in which one third of members face re-election every two years—and examine senators’ voting behavior on gun control. In line with the model’s predictions, we obtain three main results: senators are more likely to vote pro gun when they are closer to facing re-election; this behavior is driven by Democratic senators, who “flip flop” on gun control; election proximity has no impact on the voting behavior of senators who are retiring or hold safe seats.
    Keywords: Elections; Gun-control regulations; Pandering; Vocal minority
    JEL: D72 I18
    Date: 2013–11
  3. By: Jean Guillaume Forand (University of Waterloo); John Duggan (University of Rochester)
    Abstract: We establish existence and continuity properties of equilibria in a model of dynamic elections with a discrete (countable) state space and general policies and preferences. We provide conditions under which there is a representative voter in each state, and we give characterization results in terms of the equilibria of an associated “representative voting game.†When the conditions for these results are not met, we provide examples that uncover new classes of dynamic political failures.
    Date: 2014
  4. By: Fagernäs, Sonja (University of Sussex); Pelkonen, Panu (University of Sussex)
    Abstract: Primary education in India is a development question of a unique magnitude, and the delivery of education by Indian states is often suspected to be marred by political haggling and corruption. Using rich administrative school-level panel data across Indian states, we test for electoral cycles in the provision of school resources. The effects are identified using staggered timing of state elections. We find that rulers allocate more primary school resources in the years preceding and following elections, but there is only weak evidence that resources are targeted to marginal constituencies. The resources affected are visible ones, namely free school uniforms, classrooms, toilets, ramps for the disabled and medical inspections. We also show that around election years, teachers spend more time on "non-teaching" activities. The political cycles are not inevitable, as they are present only in districts characterised by low voter turnout and low female literacy. Finally, we show that electoral cycles affect human capital accumulation: The phase of the electoral cycle in which pupils begin their primary schooling, affects their learning outcomes.
    Keywords: institutions, school resources, political cycle, public goods, voter turnout, India
    JEL: H75 I25 O15 P16
    Date: 2014–08
  5. 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
  6. By: Suzuki, Sanae
    Abstract: How are different positions reconciled under decision making by consensus in international agreements? This article aims to answer this question. Consensus rule provides each participant a veto, which risks resulting in non-agreement. Taking ASEAN as a case study of international organizations that have adopted consensus rule as the main decision-making procedure, this article presents the chairship system as an analytical scheme to examine how different positions are or are not reconciled under consensus rule. The system is based on conventional knowledge regarding the chair in international conference, which can be defined as an institution where the role of the chair is taken by one member state in an international organization and plays a role in agenda-setting. The agenda-setting power given to the chair varies across organizations. This article assumes that the chair in ASEAN is given a relatively strong agenda-setting power to enable the chair to reach agreements and bias such agreements in its own favor.
    Keywords: Southeast Asia, International organization, International relations, Decision making, Politics, ASEAN, Chair, Agenda-setting
    Date: 2014–07
  7. By: Christoph Aymanns and Co-Pierre Georg
    Abstract: When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of the world and a social belief formed from observing the actions of peers. Observing a larger group of peers conveys more information and thus leads to a stronger social belief. Extending the standard model of Bayesian updating in social networks, we show that the probability that banks synchronize their investment strategy on a state non-matching action critically depends on the weighting between private and social belief. This effect is alleviated when banks choose their peers endogenously in a network formation process, internalizing the externalities arising from social learning.
    Keywords: social learning, endogenous financial networks, multi-agent simulations, systemic risk
    JEL: G21 C73 D53 D85
    Date: 2014
  8. By: Gamze Demiray; Yasin Kursat Onder; Ibrahim Unalmis
    Abstract: Until about more than a decade ago, central banks were traditionally run by individual governors. However that trend has changed and countries have started to establish monetary policy committees. Potential disadvantage of an individualistic committee (i.e., through voting) over collegial decision making is the possibility of confusing the markets by speaking with too many voices so the effects of central-bank's forward guidance are muted. This paper shows that a central bank run by a governor who is acting alone does a better job in terms of \forward guidance".
    Keywords: forward guidance, voting, communication
    JEL: E58 D71 D78
    Date: 2014
  9. By: Davis, Brent
    Abstract: This paper challenges the conventional wisdom that major fiscal policy announcements, in the form of the annual Budget, has a major and lasting impact on voter support for the incumbent government. Rather, reforming governments can ignore the media hysteria that they are 'electorally doomed' given voter's seeming short memory of such events.
    Keywords: economic voting; fiscal policy; voter behaviour
    JEL: K0
    Date: 2014–08–20
  10. By: Barrdear, John (Bank of England)
    Abstract: I present a model of social learning over an exogenous, directed network that may be readily nested within broader macroeconomic models with dispersed information and combines the attributes that agents (a) act repeatedly and simultaneously; (b) are Bayes-rational; and (c) have strategic interaction in their decision rules. To overcome the challenges imposed by these requirements, I suppose that the network is opaque: agents do not know the full structure of the network, but do know the link distribution. I derive a specific law of motion for the hierarchy of aggregate expectations, which includes a role for network shocks (weighted sums of agents' idiosyncratic shocks). The network causes agents' beliefs to exhibit increased persistence, so that average expectations overshoot the truth following an aggregate shock. When the network is sufficiently (and plausibly) irregular, transitory idiosyncratic shocks cause persistent aggregate effects, even when agents are identically sized and do not trade.
    Keywords: Dispersed information; network learning; heterogeneous agents; aggregate volatility
    JEL: C72 D82 D83 D84
    Date: 2014–08–01
  11. By: Sophia du Plessis, Ada Jansen and Krige Siebrits
    Abstract: Following several decades during which violent civil conflict was common in African countries, the period from 1990 onwards was notably marked by a spreading and deepening of adherence to democratic principles. However, it is true to say that many African countries are still experiencing political instability and civil unrest. This raises the question of why these countries cannot attain sustainable conflict resolution. Drawing on economic ideas about contracts and institutions, this paper outlines a conceptual framework for thinking about the role of constitutional rules in achieving political stability, and we elucidate the main requirement for sustainable democratic systems. The gist of the argument is that constitutional rules must become self-enforcing in order to safeguard democratic systems and to avoid relapses into violent civil conflict. We discuss selective examples where constitutions do not adhere to the framework of self-enforcement, making them unable to prevent the recurrence of civil war in these countries
    Keywords: Constitutional rules, self-enforcing constitutions, informal institutions, Democracy, civil war, Africa
    JEL: D7 N4 N9
    Date: 2014
  12. By: Pierre L. Siklos, Matthias Neuenkirch (Wilfrid Laurier University)
    Abstract: This paper examines the policy rate recommendations of the Bank of Canada’s Governing Council (GC) and the C.D. Howe Institute’s (CDHI) Monetary Policy Council (MPC) since 2003. We find, first, that differences in the median recommendations between the MPC and the GC are persistent but small (i.e., 25 bps). The median MPC recommendation is based on a higher steady state real interest rate. However, the response of the MPC and the GC to output and inflation shocks are, for the most part, comparable. Second, we are also able to examine the individual recommendations for the MPC. Estimates of the determinants of consensus inside the MPC or disagreement with the GC yield some useful insights. For example, disagreements are more likely when rates are proposed to rise than at other times. Equally interesting is the finding that the Bank of Canada conditional commitment on the overnight rate in 2009-10 has a relatively larger restricting impact on the MPC’s median recommendation than the GC’s target rate.
    Keywords: Bank of Canada, central bank communication, committee behaviour, monetary policy committees, shadow councils, Taylor rules.
    JEL: E43 E52 E58 E61 E69
    Date: 2014–03–01
  13. By: World Bank
    Keywords: Water Supply and Sanitation - Wastewater Treatment Environmental Economics and Policies Health, Nutrition and Population - Population Policies Mining and Extractive Industry (Non-Energy) Water Supply and Sanitation - Sanitation and Sewerage Environment Industry
    Date: 2014–06
  14. By: Feld, Lars P.
    Abstract: The distinct characteristic in James Buchanan's thinking about federalism in contrast to the traditional theory of fiscal federalism is his view about fiscal competition. In this paper, it is demonstrated that this thinking went through three stages. From the 1950s to the beginning of the 1970s, his analyses were well embedded in the traditional fiscal federalism literature and concerned with equity and efficiency issues. In the Leviathan approach starting from the midseventies, he considered competition between jurisdictions as a means to restrict Leviathan governments. In his interpretation of federalism as an ideal political order, Buchanan binds these perspectives together and adds a procedural view: Federalism enables citizens to exert political control, it raises their interest in politics because one vote has more influence, and it facilitates to act morally within their moral capacity. --
    Keywords: James Buchanan,Fiscal Equity,Fiscal Competition,Federalism as Political Order
    JEL: H77 B31 D78
    Date: 2014
  15. By: Sue H. Mialon; Seung Han Yoo
    Abstract: This paper models employers' preference for discrimination toward ex ante identical groups of workers when the workers must compete for limited positions. Employers benefit from discrimination against minority workers because it can reduce the overall risk from workers' noisy signals as it increases the expected quality of "majority" workers' signals and their chance to win the competition for the limited positions. We show that employers can influence the selection of a discriminatory equilibrium by choosing the set of finalists in competition primarily from a majority group. We discuss the implications of Equal Opportunity Laws in this context.
    Date: 2014–05
  16. By: Marc Ozawa
    Abstract: This study argues that, in addition to political and economic factors, the level of trust between decision makers influenced outcomes in European-Russian energy cooperation. Drawing on selected cases of commercial partnerships and long-term contracts, it examines the impact of trust and the process by which it was developed or undermined between European and Russian partners. The findings are the following. Firstly, trust appeared to mitigate suspicion and encouraged cooperation between commercial and political actors. Secondly, when trust was present, conflicts of interest were more easily overcome while in its absence, a spiral of litigation and attempts at political coercion ensued. Thirdly, the development of trust was partially determined by history, collective memories and pre-existing political and economic conditions. At the same time, actors had the option to make decisions that could contribute to building trust or not. Fourthly, the analysis demonstrates a wide variation in levels of trust between West European companies and politicians toward Russia. And finally, it underscores the importance of interpersonal relations and energy companies as non-state actors. Because of the size and scope of these projects, the trust factor has implications not only on commercial ventures but also national economies, energy security and international relations.
    Keywords: Trust, natural gas, oil, trade, cooperation, Europe, Russia, Germany, United Kingdom, networks, relations, long term contracts, European Union
    Date: 2014–08–04

This nep-cdm 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.