nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2014‒11‒22
sixteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Strategic voting in proportional representation systems By Stan Veuger; Tim Ganser
  2. Electoral involvement and appreciation for democracy under a compulsory voting rule By Acuña, Andrés
  3. Sequential Voting and Agenda Manipulation By Salvador Barberà; Anke Geber
  4. Evolution of the Russian Political Party System under the Influence of Social Conformity: 1993-2011 By Coleman, Stephen
  5. A recursive core for cooperative games with overlapping coalitions By Messan Agbaglah
  6. Backward Induction in the Wild: Evidence from the U.S. Senate By Spenkuch, Jörg
  7. To mitigate or to adapt? Collective action under asymmetries in vulnerability to losses By Esther Blanco; E. Glenn Dutcher; Tobias Haller
  8. Political Origins of the Japan Overseas Cooperation Volunteers, 1960–1965: Why the State Sends Young Volunteers Abroad By Okabe, Yasunobu
  9. Efficiency of Mandatory and Discretionary Spending By Ying Chen; Jan Zapal; Hulya Eraslan; Renee Bowen
  10. Aid and Institutions in Transition Economies By Zohid Askarov; Hristos Doucouliagos
  11. Sustainable Electricity Grid Development and the Public: An Economic Approach By Wenche Tobiasson; ToorajJamasb
  12. Do Election Results Affect the Value of Politically Connected Firms? - The Effect of the Schroeder-Merkel Change of Government on German Prime Standard Firms By Elmar A. Janssen
  13. Diversity Role on LMX relationships By Maria del Mar Bornay-Barrachina; Jaime Guerrero-Villegas
  14. Intermediation and Voluntary Exposure to Counterparty Risk By Maryam Farboodi
  15. Illegal Immigration and Fiscal Competition By Bandyopadhyay, Subhayu; Pinto, Santiago
  16. Simplified approval mechanism for social dilemmas By Xiaochuan Huang; Takehito Masuda; Yoshitaka Okano; Tatsuyoshi Saijo

  1. By: Stan Veuger (American Enterprise Institute); Tim Ganser (American Enterprise Institute)
    Abstract: We propose a model of voter decision-making in proportional representation systems: ultra-rational strategic voters construct expectations of coalitions and policy outcomes based on expected seat distributions and vote to maximize their expected utility from the implemented policy.
    Keywords: voting, proportional representation
    JEL: A
    Date: 2014–02
  2. By: Acuña, Andrés
    Abstract: This paper proposes a theoretical model for the decision of voter registration, which recovers the classical notion that democracy is a public good. The solution of the citizen's problem implies three types of Nash equilibrium (null, partial, and full enrollment), where the real cost for voter enrollment and appreciation for democracy are the key variables. In the partial-enrollment equilibrium, the citizens' democratic valuation has a threshold that encourages a free-rider behavior even when the homogeneous-citizens assumption is not met. In turn, a policy maker could avoid this threat of representativeness crisis by setting an optimal enrollment cost that depends on electorate size and citizens' heterogeneity. Finally, an empirical model is outlined from the policy maker's problem, which is coherent with classical literature on voting behavior.
    Keywords: electoral engagement, compulsory voting, voting behavior
    JEL: D72
    Date: 2013–10
  3. By: Salvador Barberà; Anke Geber
    Abstract: We provide characterizations of the set of outcomes that can be achieved by agenda manipulation for two prominent sequential voting procedures, the amendment and the successive procedure. Tournaments and super-majority voting with arbitrary quota q are special cases of the general sequential voting games we consider. We show that when using the same quota, both procedures are non-manipulable on the same set of preference profiles, and that the size of this set is maximized under simple majority. However, if the set of attainable outcomes is not single-valued, then the successive procedure is more vulnerable towards manipulation than the amendment procedure. We also show that there exists no quota which uniformly minimizes the scope of manipulation, once this becomes possible.
    Keywords: sequential voting, agendas, manipulation
    JEL: C72 D02 D71 D72
    Date: 2014–08
  4. By: Coleman, Stephen
    Abstract: The Russian political party system has developed through a tumultuous era, progressing from extreme fragmentation to a smaller, more stable number of parties. Much of this change was engineered by elites and especially by President Putin, leading to the question of whether the result is a normal party system by traditional Western standards or just a tool of the government. By means of a predictive mathematical model, the analysis shows that the party system indeed has grown strong popular roots with a great impact on the overall distribution of votes among the parties. This is caused by the pervasive but unconscious effect of social conformity on voters.
    Keywords: Russia; political parties; voting; mathematical model; social conformity; unconscious behavior
    JEL: C1 C51 D72 D87 P3
    Date: 2014–10
  5. By: Messan Agbaglah (Département d'économique, Université de Sherbrooke)
    Abstract: This paper develops an extension of the recursive core to the setting of overlapping coalitions. We show that the cooperative game theoretical traditional way of separating a deviant coalition from the game played by the ones left behind is no more satisfactory. We therefore introduce a new paradigm with which we obtain the overlapping coalition structure core whose allocations are Pareto-efficient.
    Keywords: Overlapping coalitions, Cover function game, Recursive core, Residual game, Optimistic, Pessimistic, Efficiency.
    JEL: C70 C71 D71
    Date: 2014–10
  6. By: Spenkuch, Jörg
    Abstract: Backward induction is a cornerstone of modern game theory. Yet, laboratory experiments consistently show that subjects fail to properly backward induct. Whether these findings generalize to other, real-world settings remains an open question. This paper develops a simple model of sequential voting in the U.S. Senate that allows for a straightforward test of the null hypothesis of myopic play. Exploiting quasi-random variation in the alphabetical composition of the Senate and, therefore, the order in which Senators get to cast their votes, the evidence suggests that agents do rely on backward reasoning. At the same time, Senators' backward induction prowess appears to be quite limited. In particular, there is no evidence of Senators reasoning backwards on the first several hundred roll call votes in which they participate.
    Keywords: backward induction; voting; U.S. Senate
    JEL: D0 D01 D03 D72
    Date: 2014–09–22
  7. By: Esther Blanco; E. Glenn Dutcher; Tobias Haller
    Abstract: Many policies addressing global climate change revolve around the implementation of mitigation and adaptation strategies. We experimentally examine subjects? choices in a climate change game where subjects are put into groups where they face a potential damage and have the choice to invest resources into mitigation, adaptation and/or productive funds. Resources allocated to mitigation reduce the probability of the loss to the entire group while adaptation investments reduce the magnitude of the loss to the investing agent and productive investments increases payoffs only for the investing agent. We explore subject's response to three treatment conditions; high damage, low damage and heterogeneous damage. Results show that subjects view mitigation and adaptation funds as substitutes in that they contribute higher levels to the adaptation fund if low levels of contributions to the mitigation fund exist, but free-ride on others by contributing to the productive fund if contributions to the mitigation fund are high enough. In particular, we find the highest level of contributions to the socially efficient mitigation fund when all subjects in a group face a high damage and the lowest level when all subjects face a low damage. When high-damage subjects are mixed with low-damage subjects, their contribution levels to the mitigation fund decline, but are still greater than those of their low-damage group members.
    Keywords: Collective Action, Climate Change, Economic Experiments
    JEL: H41 H87 C92
    Date: 2014–10
  8. By: Okabe, Yasunobu
    Abstract: This paper examines the political origins of the Japan Overseas Cooperation Volunteers (JOCV) through the lens of two research questions: (1) Why did the Japanese government undertake the JOCV project in 1965? and (2) Why did the project pursue multifaceted objectives –technical assistance, international friendship, and youth development? These questions are important for two reasons. First, as the country was struggling economically, experiencing domestic turmoil, and vulnerable to international conflict, it is surprising that the government would begin sending young volunteers to developing countries. Second, the JOCV’s objectives are inconsistent with each other, and therefore their coexistencerequires further examination. Using a multi-level analysis strategy, we explore international and domestic factors. The analysis of international structures focused on the Japan-US relationship and the Cold War in Asia, and proved that two factors motivated the Japanese government to create the JOCV: Prime Minister Ikeda’s desire to approach economic development in Southeast Asia; and the US government’s demand that Japan take some action regarding the US goal of expanding the idea of the Peace Corps. Our inquiry into the domestic structures focused on youth problems such as unemployment in rural areas, the anti-Security Treaty movement, and rising crime in cities. We have discussed that leaders of youth associations and young members of the governing Liberal Democratic Party (LDP) considered overseas voluntary service like the Kennedy’s Peace Corps as a potential solution to these problems. The analysis of agential factors sheds lights on the policy-making. There was disagreement between actors over the definition of the new project. While a coalition of youth associations and young members of the LDP advocated an overseas voluntary service project, the Ministry of Foreign Affairs (MOFA) insisted on dispatching experts rather than volunteers. Eventually, the two sides reached a compromise: the JOCV would be defined as a project providing both technical assistance and youth volunteers; and it should be managedunder the supervision of MOFA.Finally, this study demonstrates that when the state sends young volunteers abroad, external ideas and political actors’ concern for youth development matter. It also implies that state-sponsored volunteering can be defined as a hybrid of the state project and individual activities, which neither realism nor constructivism in international politics can solely explain.
    Keywords: Japan Overseas Cooperation Volunteers (JOCV) , youth associations , Liberal Democoratic Party(LDP) , Ministry of Foreign Affars , policy-making process
    Date: 2014–03–28
  9. By: Ying Chen (University of Southampton and Johns Hopkins University); Jan Zapal (IAE-CSIC Barcelona and CERGE-EI Prague); Hulya Eraslan (Johns Hopkins University); Renee Bowen (Stanford GSB)
    Abstract: Which budgetary institutions result in efficient provision of public goods? We analyze a model with two parties deciding the allocation to a public good each period. Parties place different values on the public good, but these values may change over time. We model a budgetary institution as the rules governing feasible allocations to mandatory and discretionary spending programs. We model mandatory spending as an endogenous status quo since it is enacted by law and remains in effect until changed, and discretionary spending as periodic appropriations that are not allocated if no new agreement is reached. We consider budgetary institutions that either allow only discretionary programs, only mandatory programs or an endogenous choice of mandatory and discretionary programs. We show that discretionary only institutions can lead to dynamic inefficiencies, mandatory only institutions can lead to static and dynamic inefficiencies, whereas allowing an endogenous choice between mandatory and discretionary programs will result in public good allocations that are statically and dy- namically Pareto efficient if the value of the public good is increasing over time. Furthermore, we show that if mandatory programs are allowed to be temporarily suspended, an endogenous choice of mandatory and discretionary programs will result in public good allocations that are dynamically and statically Pareto efficient, for any change in the value of the public good.
    Date: 2014
  10. By: Zohid Askarov; Hristos Doucouliagos
    Abstract: We investigate whether aid contributed to institutional development in transition economies. We find that aid flows have a positive effect on democratization, especially on constraints on the executive and political participation. At the same time, total aid has no effect on overall quality of governance, while US aid appears to have a negative impact on some dimensions of governance. Aid’s differential impact on democracy and governance is consistent with uneven development of institutions and the democracy consolidation hypothesis. We also find that aid has a non-linear effect on democracy. Openness has a positive effect on both democracy and good governance. Oil resources have an adverse effect on democracy. Adult mortality, civil war and adherence to Islam are all detrimental to good governance.
    Keywords: aid, institutions, democracy, governance
    Date: 2014–10–25
  11. By: Wenche Tobiasson; ToorajJamasb
    Abstract: Increasingly, local opposition to new electricity grid development projects cause lengthy delays and places financial and practical strain on the projects. The structure of the electricity industry is in transition due to the emergence of smaller but more numerous electricity generation facilities. Also, the general public and local communities are increasingly active and engage with energy and environmental issues. Thus, the traditional decision making frameworks and processes are proving less effective in solving the present time conflicts between local communities and other stakeholders. This paper proposes an economic approach to resolve such conflicts. This paper discusses how compensation, benefit sharing, and property rights can play a role in reducing community opposition to new grid developments. We argue that these methods need to be part of an overarching societal strategy and policy towards environmental effects of grid development. We then propose that such impacts can be addressed within the framework of 'weak' versus 'strong' sustainability. Finally, we suggest that the concepts of 'collective negotiation' and 'menu of options' in regulatory economics can be adapted to operationalize this sustainability-based approach to community engagement with new grid projects
    Keywords: Electricity transmission; Social sustainability; public and local opposition; compensation and benefit sharing.
    JEL: L43 L94 D23 D70
    Date: 2014–10–03
  12. By: Elmar A. Janssen (University of Paderborn)
    Abstract: This study applies event study methodology to the outcomes of the 2005 election of the German Bundestag. Results are compared to those of Goldman, Rocholl and So (2009) who found that following the 2000 presidential election in the US, value effects were positive for firms connected to the Republicans and significantly different from the negative ones of firms connected to the Democrats. The present study shows that, contrary to expectations, political connections had little impact on the value of politically connected corporations among the companies listed at the DAX, MDAX, SDAX or TecDAX. The key results of this study are: First, there is a significantly smaller fraction of politically connected firms in Germany than in the US. Second, following the start of the exploratory talk and the inauguration of the new government, politically connected companies generate about 0.7 and 1.2 percent higher abnormal returns, respectively. Finally, while there is no significant impact of the election results on the returns of companies with political connections with respect to other different characteristics, there is slight support that connections to the federal parliament are more valuable than those to the state parliaments. The different reactions of the US and the German Stock Market are likely to occur due to the different corporate governance systems. Nearly all identified political connections in the present study are based on memberships on the supervisory board which duties are to give advice and control.
    Keywords: corporate governance, two tier system, political connectedness, firm value, event study
    JEL: J53 G14 G34 G38 L14
    Date: 2014–07
  13. By: Maria del Mar Bornay-Barrachina (Department of Business Administration, Universidad Pablo de Olavide); Jaime Guerrero-Villegas (Department of Business Administration, Universidad Pablo de Olavide)
    Abstract: High quality leader-member relationships (LMX) provide huge opportunities for strategic and organizational benefits (see Graen & Uhl-Bien, 1996; Liden et al., 1997). Despite the many positive effects of high LMXs, one area in need of empirical investigation is evidence of what leads to higher and lower quality relationships (Uhl-Bien, et al., 2000). The present analyses the antecedents of LMX, following the similarity-attraction paradigm at the dyad and at the team level, and specifically explores the consequences on team innovation. Our results support prior research, about demographic variables positive related to quality of LMX development, adding evidence on the importance of combine many demographic variables together. Focusing on gender role in the development of LMX and team composition, this investigation point out that the gender of the leader is the more relevant determinant for developing high LMXs. We also explore the consequences of these relationships on team outcomes, specifically team innovations.
    Keywords: Leader-Member Exchange, Demography Role, Gender Role, Teams, Team innovation
    Date: 2014–10
  14. By: Maryam Farboodi (University of Chicago)
    Abstract: I develop a model of the financial sector in which endogenous intermediation among debt financed banks generates excessive systemic risk. Financial institutions have incentives to capture intermediation spreads through strategic borrowing and lending decisions. By doing so, they tilt the division of surplus along an intermediation chain in their favor, while at the same time reducing aggregate surplus. I show that a core-periphery network -- few highly interconnected and many sparsely connected banks -- endogenously emerges in my model. The network is inefficient relative to a constrained efficient benchmark since banks who make risky investments "overconnect", exposing themselves to excessive counterparty risk, while banks who mainly provide funding end up with too few connections. The predictions of the model are consistent with empirical evidence in the literature.
    Date: 2014
  15. By: Bandyopadhyay, Subhayu (Federal Reserve Bank of St. Louis); Pinto, Santiago (Federal Reserve Bank of Richmond)
    Abstract: This paper examines illegal immigration in a spatial context. Consider two countries: a source and a host of illegal immigration. Both countries produce the same good employing labor. There are legal restrictions to the movement of labor across countries. The host country consists of two regions (jurisdictions or states). These two regions share their borders with the source country. The host country controls illegal immigration using two alternative policy instruments: (i) it devotes resources to stop illegal immigrants at the border preventing them from entering the country; and (ii) it allocates resources to internal enforcement. Enforcement levels, both internal and border, may a priori differ by regions. The paper compares the provision of enforcement chosen by a federal government in the host country to the levels that would prevail under different allocation of responsibilities between the federal and regional governments in deciding border and internal enforcement levels.
    Keywords: illegal immigration; fiscal competition; border enforcement; internal enforcement.
    JEL: D72 D78 F21 F23
    Date: 2014–10–24
  16. By: Xiaochuan Huang (DT Captical Management Co., LTD.); Takehito Masuda (Research Center for Social Design Engineering, Kochi University of Technology); Yoshitaka Okano (Kochi University of Technology); Tatsuyoshi Saijo (Kochi University of Technology)
    Abstract: We develop the simplified approval mechanism (SAM) for n-player public good provision with binary choice. The SAM provides each cooperator a chance to revise his choice when players’ choices are not unanimous. Hence, players can easily retaliate against defection as widely proposed in repeated game theory or conditionally cooperate as observed in voluntary contribution game experiments. The SAM implements the cooperative outcome in backward elimination of weakly dominated strategies (BEWDS). The implementation result also holds in limit logit agent quantal response equilibrium (LAQRE). The average cooperation rate in the SAM experiment is 86.6% across 15 periods, which increases to 96.0% after period 5. Analyzing choice data and responses to the pre-play questionnaires reveals that subjects defect because of free-riding motivations or feelings of uncertainty in others’ cooperation. After observing defections, cooperators switch to defection, which decreases cooperation rates between the first and second stages of each period.
    Keywords: social dilemma, public good, experiment
    JEL: C72 C92 D74 H41 P43
    Date: 2014–10

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.