nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2015‒04‒02
eleven papers chosen by
Stan C. Weeber, McNeese State University

  1. Democracy With Group Identity By Arye L. Hillman; Kfir Metsuyanim; Niklas Potrafke
  2. So Closed: Political Selection in Proportional Systems By Galasso, Vincenzo; Nannicini, Tommaso
  3. The strategic dis/advantage of voting early By Eddie Dekel; Michele Piccione
  4. Bargaining under surveillance: Evidence from a three-person ultimatum game By Lauri Saaksvuori; Abhijit Ramalingam
  5. Making Democracy Work: Culture, Social Capital and Elections in China By Padró i Miquel, Gerard; Qian, Nancy; Xu, Yiqing; Yao, Yang
  6. The Paradox of Grading Systems By Brams, Steven; Potthoff, Richard
  8. Influence Networks and Public Goods By Dunia López-Pintado
  9. Isolating and identifying motivations: A voluntary contribution mechanism experiment with interior Nash equilibria By Takehisa Kumakawa; Tatsuyoshi Saijo; Takehiko Yamato
  10. Domestic political competition and binding overhang in developing countries By James Lake; Maia K. Linask
  11. The Effects of Group Brainstorming on the Auditor’s Search for Potential Misstatements and Assessment of Fraud Risk in the Presence of Pressures and Opportunities By Desai, Naman

  1. By: Arye L. Hillman (Bar-Ilan University); Kfir Metsuyanim; Niklas Potrafke
    Abstract: Group-based identity undermines democracy by impeding democratic change of government. A substantial literature has therefore studied how to make democracy consistent with group identity. We contribute to this literature by introducing the role of group decisiveness into voting incentives and mobilization of voters. In the elections that we study, for the same populations, accounting for income and other influences, group identity increased voter turnout on average by some 8 percentage points in local elections and decreased voter turnout by some 20 percentage points in national elections. We empirically investigate the effect of group identity on voter turnout and also evaluate whether group identity resulted in budgetary imbalance or replacement of local government because of disfunctionality. Our general contribution is to show how democracy can persist with group identity, although democracy in such instances differs from usual political competition.
    Date: 2015–03
  2. By: Galasso, Vincenzo; Nannicini, Tommaso
    Abstract: We analyze political selection in a closed list proportional system where parties have strong gate-keeping power, which they use as an instrument to pursue votes. Parties face a trade-off between selecting loyal candidates or experts, who are highly valued by the voters and thus increase the probability of winning the election. Voters can be rational or behavioral. The former care about the quality mix of the elected candidates in the winning party, and hence about the ordering on the party list. The latter only concentrate on the quality type of the candidates in the top positions of the party list. Our theoretical model shows that, to persuade rational voters, parties optimally allocate loyalists to safe seats and experts to uncertain positions. Persuading behavioral voters instead requires to position the experts visibly on top of the electoral list. Our empirical analysis, which uses data from the 2013 National election in Italy---held under closed list proportional representation---and from independent pre-electoral polls, is overall supportive of voters' rational behavior. Loyalists (i.e., party officers or former members of Parliament who mostly voted along party lines) are overrepresented in safe positions, and, within both safe and uncertain positions, they are ranked higher in the list.
    Keywords: closed party lists; electoral rule; political selection
    JEL: D72 D78 P16
    Date: 2015–03
  3. By: Eddie Dekel; Michele Piccione
    Abstract: Under sequential voting, voting late enables conditioning on which candidates are viable, while voting early can influence the field of candidates. But the latter effect can be harmful: shrinking the field increases not only the likelihood that future voters vote for one's favorite candidate, but also that they vote for an opponent. Specifically, if one's favorite candidate is significantly better than all others then early voting is disadvantageous and all equilibria are equivalent to simultaneous voting. Conversely, when some other candidate is almost as good then any Markov, symmetric, anonymous equilibrium involves sequential voting (and differs from simultaneous voting).
    JEL: D72
    Date: 2014–11
  4. By: Lauri Saaksvuori (University of Hamburg); Abhijit Ramalingam (University of East Anglia)
    Abstract: This paper examines how third-party surveillance influences preferences over distributional outcomes. In addition, we examine what motivates people to invest economic resources to monitor decision-making processes. Our results show that a large majority of individuals is willing to pay for a right to monitor decision-making processes over distributional outcomes despite pecuniary incentives to the contrary. We find that electronic third-party surveillance does not affect distributional outcomes in a three-person ultimatum game. Finally, we find that third- parties are the most over-optimistic about their own outcomes when they have a chance to signal their presence to the negotiators. Our results suggest that people may overestimate the impact of transparent decision-making on economic outcomes.
    Keywords: bargaining, communication, distributional preferences, experiment, negotiations, surveillance
    JEL: C72 C92 D01 D03 D83
    Date: 2015–03
  5. By: Padró i Miquel, Gerard; Qian, Nancy; Xu, Yiqing; Yao, Yang
    Abstract: This paper aims to show that culture is an important determinant of the effectiveness of formal democratic institutions, such as elections. We collect new data to document the presence of voluntary and social organizations and the history of electoral reforms in Chinese villages. We use the presence of village temples to proxy for culture, or more specifically, for social (civic) capital and show that their presence greatly enhances the increase in public goods due to the introduction of elections. These results support the view that social capital complements democratic institutions such as elections.
    Keywords: Civic Capital; History; Institutions; Public Goods; Trust
    JEL: H41 P16
    Date: 2015–03
  6. By: Brams, Steven; Potthoff, Richard
    Abstract: We distinguish between (i) voting systems in which voters can rank candidates and (ii) those in which they can grade candidates, such as approval voting, in which voters can give two grades—approve (1) or not approve (0)—to candidates. While two grades rule out a discrepancy between the average-grade winners, who receive the highest average grade, and the superior-grade winners, who receive more superior grades in pairwise comparisons (akin to Condorcet winners), more than two grades allow it. We call this discrepancy between the two kinds of winners the paradox of grading systems, which we illustrate with several examples and whose probability we estimate for sincere and strategic voters through a Monte Carlo simulation. We discuss the tradeoff between (i) allowing more than two grades, but risking the paradox, and (ii) precluding the paradox, but restricting voters to two grades.
    Keywords: Voting; elections; ranking system; grading system; approval voting; Condorcet paradox
    JEL: C61 C70 D71 D78
    Date: 2015–03–26
  7. By: Davide Vannoni (University of Torino)
    Abstract: The paper models the determinants of inefficiency in a framework in which politically connected local monopolies organize the provision of a local public service. We first use a standard career concern approach of political agency to model the relation between voters observability of the managerial behavior and political accountability. We then enrich our setting, by explicitly introducing corruption. Following the World Banks denition (World Bank, 1997), we regard corruption as the abuse of public office for private gain. Using Dal Bò and Rossi's (2007) approach, we then characterize a corrupt environment as one where private benets from diverting managerial effort away from the productive process are substantial . We show that corruption distorts managerial effort incentives, leading to an increase in the extent of inefficiency. We derive the implication that inefficiency is greater for waste operators located in more corrupt regions, and in regions where voters are less informed. We test these predictions using a rich unique micro dataset on the solid waste collection and disposal activity in Italy, which includes more than fivevhundred municipalities observed in the years 2004-2006. We use a stochasticvcost frontier approach to analyze the e¤ects of accountability and corruption on the costs of providing municipal solid waste (MSW) services throughout Italy. We measure accountability by newspapers readership and electoral participation, and corruption by the number of criminal charges against the State, public governments and social institutions. The empirical evidence supports our predictions. We find that both accountability and corruption have an impact, in the expected direction, on the costs of MSW services. Moreover, by enriching our cost frontier specication, we obtain some interesting additional insights. In particular, we find that the impact of accountability on reducing inefficiency is smaller or even disappears when municipalities organize the service in-house or join a intermunicipal consortium, while corruption is less of harm to efficiency when municipalities are ruled by left-wing parties.
    Keywords: corruption, accountability efficiency, solid waste
    JEL: D24 D73 Q53
    Date: 2014–07
  8. By: Dunia López-Pintado (Universidad Pablo de Olavide)
    Abstract: We consider a model of social interactions in which agents are assumed to acquire information from others through a certain sampling process that generates an influence network. These networks comprise a wide array of options depending on the level of correlation assumed between agents' in and out degree. We study the provision of public goods in influence networks and show that the equilibrium (of the corresponding best-shot game) always exists and it is unique. We derive further insights for this problem by performing a comparative statics analysis.
    Keywords: influence networks; public goods; out-degree; in-degree; best-shot game
    JEL: D85 H41
    Date: 2015–03
  9. By: Takehisa Kumakawa (Osaka University); Tatsuyoshi Saijo (School of Economics and Management, Kochi University of Technology); Takehiko Yamato (Tokyo Institute of Technology)
    Abstract: What motivates subjects in their decision making is a lingering issue in public goods experiments. Using a nonlinear payoff function and a two-subject model, we create a one-toone correspondence between contributions and motivations, enabling us to isolate and identify the following three possible motivations: Nash, cooperative, and altruistic motivations. The experimental results show that Nash- motivated behavior accounts for more than 70% of all decisions. Some subjects reveal a cooperative motivation when they know the other subject's payoff information. Altruistic motivation is found to be rare throughout the experiment.
    Keywords: Motivation, Nash, Cooperation, Altruism, Voluntary contribution mechanism
    JEL: C92 H41
    Date: 2015–03
  10. By: James Lake (Southern Methodist University); Maia K. Linask (University of Richmond)
    Abstract: Governments, especially in developing countries, routinely practice binding overhang (i.e. setting applied tariffs below their binding WTO commitments) and frequently move the applied tariff for a given product up and down over the business cycle. Indeed, counter to conventional wisdom, applied tariffs are pro-cyclical in developing countries. We explain this phenomenon using a dynamic theory of lobbying. The government is captured by import-competing industries (or exporters), whose applied tariff concessions in response to lobbying threats by exporters (import-competing industries) cause fluctuations in applied tariffs and, thus, binding overhang. Applied tariffs are pro-cyclical when the government is captured by import-competing industries because these industries concede lower tariffs to exporters during recessions given recessions lower the opportunity cost of lobbying and thereby generate a stronger lobbying threat.
    Keywords: Binding overhang, lobbying, tariff bindings, applied tariffs
    JEL: C73 D72 F13
    Date: 2015–02
  11. By: Desai, Naman
    Abstract: This paper examines the effect of SAS No. 99 recommended group brainstorming on the auditor’s search for potential material misstatements and assessments of fraud risk in the presence of different levels of pressures and opportunities. We argue that there are potential differences in the auditor’s evaluation of pressures and opportunities while searching for potential material misstatements and assessing fraud risk, and these differences could be exaggerated when auditors brainstorm in groups. The results of a 2 x 2 x 2 between-subjects experiment (in which pressures and opportunities were manipulated at high and low levels, and brainstorming occurred individually or in three member audit teams) indicate that auditors found a significantly greater number of potential material misstatements when they observed high pressures and low opportunities compared to when they observed low pressures and high opportunities (even though there was an equal number of potential material misstatements across in all the treatments). Furthermore, this difference was significantly increased when auditors performed group brainstorming. Similarly, auditors’ assessments of fraud risk were significantly higher when they observed high pressures and low opportunities as compared to when they observed low pressures and high opportunities. Again, this difference was significantly increased when auditors performed group brainstorming.

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