nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2015‒06‒13
sixteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Voting for direct democratic participation: Evidence from an initiative election By Felix Arnold; Ronny Freier; Magdalena Pallauf; David Stadelmann
  2. Intergenerational Politics, Government Debt, and Economic Growth By Tetsuo Ono
  3. Bargaining in the Presence of Condorcet Cycles: The Role of Asymmetries By Aaron Kamm; Harold Houba
  4. Judge: Don't Vote! By Balinski, Michel; Laraki, Rida
  5. Reaching Consensus Through Simultaneous Bargaining By Jean-François Laslier; Matías Núñez; Carlos Pimienta
  6. The most unkindest cuts: speaker selection and expressed government dissent during economic crisis By Alexander Herzog; Kenneth Benoit
  7. Alliance formation in contests with incomplete information By Metzger, Lars P.
  8. Heterogeneous agents and decison making within firms By Hung, Chung-yu
  9. Majority Choice of Tax Systems in Single- and Multi-Jurisdictional Economies By Stephen Calabrese; Dennis Epple; Richard Romano
  10. Women Leaders and Social Performance: Evidence from Financial Cooperatives in Senegal By Anaïs A Périlleux; Ariane Szafarz
  11. In-group favoritism and discrimination among multiple out-groups By Grimm, Veronika; Utikal, Verena; Valmasoni, Lorenzo
  12. Non-mandatory say on pay votes and AGM participation: Evidence from Germany By Powell, Daniel; Rapp, Marc Steffen
  13. The power of objects ? Materiality and institutional work in the French recorded music industry (1994-2014) By Vancaelemont, Anne
  14. Higher-order risk preferences in social settings: An experimental analysis By Heinrich, Timo; Mayrhofer, Thomas
  15. A Hybrid Public Good Experiment Eliciting Multi-Dimensional Choice Data By Daniela Di Cagno; Arianna Galliera; Werner Güth; Luca Panaccione
  16. Social Capital and the Repayment of Microfinance Group Lending. A Case Study of Pro Mujer Mexico By Luminita Postelnicu; Niels Hermes; Roselia Servin Juarez

  1. By: Felix Arnold; Ronny Freier; Magdalena Pallauf; David Stadelmann
    Abstract: We study a constitutional change in the German State of Bavaria where citizens, not politicians, granted themselves more say in politics at the local level through a state initiative election. This institutional setting allows us to observe revealed preferences for direct democracy and to identify factors which explain these preferences. Empirical evidence suggests that support for direct democracy is related to dissatisfaction with representative democracy in general rather than with an elected governing party.
    Keywords: Direct Democracy; Voting; Initiative; Parties
    JEL: D72 H70
    Date: 2015–06
  2. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This study presents a two-period overlapping-generations model featuring in- tergenerational conflict over fiscal policy. In particular, we characterize a Markov- perfect political equilibrium of the voting game between generations and show the following three main results. First, population aging incentivizes the government to invest more in capital for future public spending, positively affecting economic growth. Second, when the government finances its spending by issuing bonds, the introduction of the balanced budget rule results in a higher public spending-to-GDP ratio and a higher growth rate. Third, to obtain a normative implication of the po- litical equilibrium, we compare it with an allocation chosen by a benevolent planner who takes care of all future generations. The planner's allocation might feature less growth and more borrowing than the political equilibrium if the planner attaches low weights to future generations.
    Keywords: Economic Growth; Government Debt; Overlapping Generations; Pop- ulation Aging; Voting
    JEL: D72 D91 H63
    Date: 2014–06
  3. By: Aaron Kamm (Faculty of Economics and Business, University of Amsterdam, the Netherlands); Harold Houba (Faculty of Economics and Business Administration, VU University Amsterdam, the Netherlands)
    Abstract: This paper reports results from a laboratory experiment studying the role of asymmetries, both in payoffs and recognition probabilities, in a model of strategic bargaining with Condorcet cycles. Overall, we find only limited support for the equilibrium predictions. The main deviations from theory are: a) Subjects under-exploit their bargaining power by being more accommodating in their acceptance decision than predicted; b) subjects’ change in behavior in reaction to asymmetric recognition probabilities exhibits systematic deviations from theory. This suggests that subjects do not fully grasp the subtle effects asymmetries have on bargaining power, especially when the asymmetries relate to recognition probabilities.
    Keywords: Bargaining; Condorcet Paradox; Experiments; Voting; Committees
    JEL: C73 C78 C91 C92 D72
    Date: 2015–06–01
  4. By: Balinski, Michel; Laraki, Rida
    Abstract: This article argues that the traditional model of the theory of social choice is not a good model and does not lead to acceptable methods of ranking and electing. It presents a more meaningful and realistic model that leads naturally to a method of ranking and electing—majority judgment—that better meets the traditional criteria of what constitutes a good method. It gives descriptions of its successful use in several different practical situations and compares it with other methods including Condorcet's, Borda's, first-past-the-post, and approval voting.
    Keywords: methods of electing and ranking; Condorcet and Arrow paradoxes; strategic manipulation; faithful representation; meaningful measurement; figure skating; presidential elections; jury decision;
    JEL: C72 D71
    Date: 2014
  5. By: Jean-François Laslier (CNRS and Paris School of Economics); Matías Núñez (CNRS and THEMA, University of Cergy-Pontoise); Carlos Pimienta (School of Economics, UNSW Business School, UNSW)
    Abstract: We propose a two-player bargaining game where each player simultaneously proposes a set of lotteries on a finite set of alternatives. If the two sets have elements in common the outcome is selected by the uniform probability measure over the intersection. If otherwise the sets do not intersect the outcome is selected by the uniform probability measure over the union. We show that this game always has an equilibrium in sincere strategies (i.e. such that players truthfully reveal their preferences). We also prove that every equilibrium is individually rational and consensual. If furthermore players are partially honest then every equilibrium is efficient and sincere. We use this result to fully characterize the set of equilibria of the game under partial honesty.
    Keywords: Approval voting, bargaining, partial honesty, consensual equilibrium
    JEL: C70 C72
    Date: 2015–04
  6. By: Alexander Herzog; Kenneth Benoit
    Abstract: Economic crisis and the resulting need for austerity budgets have divided many governing parties and coalitions in Europe, despite strong party discipline in the legislative voting on these harsh budgets. We measure these divisions using automated text analysis methods to scale the positions that legislators express in budget debates, in an effort to avoid punishment by voters for supporting austerity measures, while still adhering to strict party discipline by voting along party lines. Our test case is Ireland, a country that has experienced both periods of rapid economic growth as well as one deep financial and economic crisis. Tracking dissent from 1987 to 2013, we show that austerity measures undermine government cohesion, as verbal opposition markedly increases in direct response to the economic pain felt in a legislator’s constituency. The economic vulnerability of a legislator’s constituency also directly explains position taking on austerity budgets among both government and opposition.
    Keywords: Text analysis; intra-party politics; economic crisis; budget debates; parliamentary speeches
    JEL: E6
    Date: 2015
  7. By: Metzger, Lars P.
    Abstract: This paper studies a contest in which players with unobservable types may form an alliance in a pre-stage of the game to join their forces and compete for a prize. We characterize the pure strategy equilibria of this game of incomplete information. We show that if the formation of an alliance is voluntary, players do not reveal private information in the process of alliance formation in any equilibrium. In this case there exists a pooling equilibrium without alliances with a unique effort choice in the contest and there exist equilibria in which all types prefer to form an alliance. If the formation of an alliance can be enforced by one player with positive probability there exists an equilibrium in which only the low types prefer to form an alliance.
    Abstract: Der vorliegende Aufsatz untersucht ein Modell, in welchem Agenten mit unbeobachtbaren Typen ihre Kräfte in Allianzen vereinen können, bevor sie in einen Wettstreit um eine Ressource eintreten. Wir beschreiben die Gleichgewichte in reinen Strategien dieses Spiels unter unvollständiger Information. Für den Fall des freiwilligen Eintritts in eine Allianz zeigen wir, dass die Spieler in keinem Gleichgewicht private Information während der Bildung der Allianz offenbaren. In diesem Fall existiert ein vereinigendes Gleichgewicht ohne Allianz, in dem die Spieler eine eindeutige, typen-abhängige Investition im Wettstreit wählen. Es existieren auch vereinigende Gleichgewichte, in welchen es alle Spieler-Typen strikt bevorzugen, in eine Allianz einzutreten. Falls eine Allianz seitens eines Spielers mit positiver Wahrscheinlichkeit erzwungen werden kann, existiert ein trennendes Gleichgewicht, in welchem nur die schwachen Spieler-Typen in die Allianz eintreten wollen.
    Keywords: alliance formation,contest,incomplete information,free-riding,signalling
    JEL: C72 D72 D74 D82
    Date: 2015
  8. By: Hung, Chung-yu (Tilburg University, School of Economics and Management)
    Abstract: This dissertation explores the implications of agents’ heterogeneity in decision making within situations where information is not completely contractible. Specifically, the study applies empirical methods across three chapters to examine the role of employees’ traits and their mutual relationships in decision making within firms. The first chapter investigates the association between managerial ability and managers’ discretionary bonus decisions using a dataset from a Chinese hospital and shows that more able managers keep a smaller bonus slice to themselves and make a lower degree of bonus differentials among the subordinates than less able managers.<br/>The second chapter analyzes data from a manufacturer in China that includes two work environments: (1) the LINE setting, with a production environment composed of stand-alone work stations and individual incentives, and (2) the GROUP setting, with joint team production and group incentives. Here, the research analyzes the effects of workforce homogeneity on employee learning and provision of effort, as well as whether the effects differ across the two settings. This chapter documents that workforce homogeneity decreases employee learning in the LINE setting, but improves learning in the GROUP setting. However, it does not find empirical evidence on employee effort provision. <br/>The final chapter explores how the working relationship between decision makers and information providers simultaneously affects information use and reporting through data on loan approval decisions in a car dealership in Taiwan, where the working relationship is shaped by whether information providers work either in a franchise or in a company outlet. The findings suggest that the close working relationship reduces biases in information use and reporting and results in a low default rate.<br/>
    Date: 2015
  9. By: Stephen Calabrese; Dennis Epple; Richard Romano
    Abstract: We examine majority choice of tax instruments in single- and multi-jurisdictional economies with heterogeneous households. In our framework majority voting equilibrium exists despite the multidimensional policy choice set. We identify five competing incentives that influence choice of tax instruments. Equilibria generally entail a mixture of tax types. With multiple jurisdictions, strong reliance on head taxation in rich communities arises to deter poorer households from immigrating. Mobility fundamentally affects the equilibrium tax system with redistribution incentives dominating choice of instruments when mobility is limited. Limiting or eliminating head taxation fundamentally alters stratification, public good provision levels, and tax systems.
    JEL: H2 H71
    Date: 2015–06
  10. By: Anaïs A Périlleux; Ariane Szafarz
    Abstract: How do women leaders such as board members and top managers influence the social performance of organizations? This paper addresses the question by exploiting a unique database from a Senegalese network of 36 financial cooperatives. We scrutinize the loan-granting decisions, made jointly by the locally elected board and the top manager assigned by the central union of the network. Our findings are threefold. First, female-dominated boards favor social orientation. Second, female managers tend to align their strategy with local boards' preferences. Third, the central union tends to assign male managers to female-dominated boards, probably to curb the boards’ social orientation.
    Keywords: Gender; Governance; Leadership; Microfinance; Africa; Senegal
    JEL: G20 J54 O16 G34 O55 L31
    Date: 2015–05–27
  11. By: Grimm, Veronika; Utikal, Verena; Valmasoni, Lorenzo
    Abstract: In this study, we investigate how and why people discriminate among different groups, including their own groups and multiple out-groups. In a laboratory experiment, we use dictator games for five groups to compare actual transfers to in-group and out-group agents with the respective beliefs held by dictators and recipients in these groups. We observe both in-group favoritism and discrimination among multiple out-groups. Individuals expect others to be in-group biased, as well as to be treated differently by different out-groups. Dictators' in-group favoritism is positively related to the degree of in-group favoritism they expect other dictators to exhibit. Moreover, we find that a dictator tends to be relatively more generous toward a specific out-group when he or she expects that dictators belonging to that out-group are generous toward members of his or her ingroup.
    Keywords: discrimination,experiment,group identity,dictator game,beliefs
    JEL: C91 C92 D84 D01 D64
    Date: 2015
  12. By: Powell, Daniel; Rapp, Marc Steffen
    Abstract: Since August 2009, German legislation allows for voluntary Say on Pay Votes (SoPV) during Annual General Meetings (AGMs). We examine 1,169 AGMs of all German listed firms with more than 10,000 agenda items over the period 2010-2013 to identify (1) determinants and approval rates of voluntary SoPVs, (2) the effect of voluntary SoPVs on AGM participation, and (3) the effect of SoP on executive compensation. Our data reveals that in the first four years of the voluntary say on pay regime every second firm in our sample has opted for having a SoPV. The propensity for a SoPV increases with firm size, abnormal executive compensation and free float of shares. Indeed, smaller firms with concentrated ownership do not only have a lower propensity for a SoPV, but also show a higher propensity to opt for only limited disclosure of executive compensation. Approval rates of SoPVs are lower than the approval rate for the average AGM agenda item and this effect is stronger in (i) widely held firms as well as in (ii) firms with abnormal executive compensation. Additionally, SoPVs actually can increase AGM participation; however, this result is particularly evident for widely held firms. Finally, we find stronger pay for performance elements within total executive compensation, particularly when the effect of executive compensation is lagged over the years following the vote. Overall, our results are consistent with the view that firms use voluntary SoPV to gain legitimation for executive remuneration policies in firms with low ownership concentration. This is enforced, where (small) shareholders consider executive compensation a part of the agency problem of listed firms, and where (small) shareholders consider SoPVs as a possibility to actively influence corporate decisions, with these decisions leading to a higher degree of alignment between executive management boards and shareholders.
    Keywords: Corporate Governance,Executive Remuneration,Say on Pay,Annual General Meeting,Germany
    JEL: G30 G38 J30 J33
    Date: 2015
  13. By: Vancaelemont, Anne
    Abstract: The present paper seeks to contribute to the understanding of the role played by materiality in institutional work (Lawrence and Suddaby, 2006). To do so, we consider practices as a key point to define institutions (Greenwood et al., 2008) and to understand agency (Bourdieu, 1992; 1996). Doing so, we follow Neo-Institutional Theory recent additions to the institutional work literature and take part in an emerging movement of renewed attention towards (micro-)practices and materiality (Zietsma & Lawrence, 2010; Jones & Massa, 2013; Gawker & Phillips, 2013 ; Raviola & Norbäck, 2013). In particular, our study investigates how objects (either physical or not) play a role in institutional work through practices. ! Thanks to a field case study of the French recorded music industry (1994-2014), based on observation data, secondary data and interviews gathered in four sub-cases, we deliver narratives of how objects together with actors, shape micro-practices - therefore emergent patterns of practices, and play an active role in creating, maintaining or disrupting institutionalized practices at the field level. First, our case reveals that objects relate to other objects and material practices within what we call « objects and practices groupings », as components. A so called grouping is both a process and the result of that process. It constitute the level where institutional work is enacted. Second, our study suggests the addition of two specific kinds of component objects in the researcher toolbox to investigate materiality: bridge objects and community objects. They play different roles in institutional work. The former enables the importation of useful object resources (from another grouping). The latter seams to play a crucial role in micro- practices transformation into collective practices at the macro level. Last but not least, our study leads to a sensitive consideration of material practices. Indeed, the audio form of objects influences actors decisions and practices. Yet, these decisions and practices also depend subjectively on actors skills to learn and evaluate the given audio form. All in all, the present paper shows how materiality (objects and practices groupings) empower actors, either classic organizations such as companies or more informal groups of actors such as consumers, shape their decisions and practices and enable them to take an active part in the institutional work. That object grouping empowerment can be described as a process of social, economic and cultural capital acquisition.
    Keywords: Neo-Institutional Theory; Creative Industry; Materiality; Practices;
    JEL: B52 L82
    Date: 2015–06
  14. By: Heinrich, Timo; Mayrhofer, Thomas
    Abstract: We study higher-order risk preferences, i.e. prudence and temperance, next to risk aversion in social settings. Previous experimental studies have shown that higher-order risk preferences affect the choices of individuals deciding privately on lotteries that only affect their own pay-off. Yet, most risky and financially relevant decisions in the field are made in the social settings of households or organizations. We aim to narrow the gap between laboratory and field evidence by creating a more realistic decision making environment in the laboratory that allows us to identify the influence of different social settings under controlled conditions. We elicit higher-order risk preferences of individuals and systematic ally vary how an individual's decision is made (alone or while communicating with a partner) and who is affected by the decision (only the individual or the partner as well). In doing so, we can isolate the effects of other-regarding concerns and communication on choices. We observe that individuals become more risk-averse when the partner is able to communicate with the decision maker. However, we do not observe an influence of social settings on prudence and temperance. Our results reveal that the majority of choices are risk-averse, prudent, and temperate across social settings.
    Abstract: Wir untersuchen neben Risikoaversion auch Risikopräferenzen höherer Ordnung, d.h. "Prudence" und "Temperance" in sozialen Situationen. Experimentelle Studien haben bisher gezeigt, dass Risikopräferenzen höherer Ordnung die Entscheidungen von Individuen bestimmen, die isoliert zwischen Lotterien wählen, die nur ihre eigene Auszahlung bestimmen. Jedoch werden die meisten finanziell relevanten Entscheidungen unter Unsicherheit in sozialen Situationen getroffen, z.B. in Haushalten oder Organisationen. In unserer Studie verkleinern wir die Diskrepanz zwischen bisheriger Labor- und Feldevidenz, indem wir eine realistischere Entscheidungssituation im Labor kreieren. Sie erlaubt es, den Einfluss unterschiedlicher sozialer Einflüsse unter kontrollierten Bedingungen zu identifizieren. Wir erheben Risikopräferenzen höherer Ordnung von Individuen und variieren systematisch wie eine Entscheidung getroffen wird (alleine oder während der Kommunikation mit einem Partner) und wer von der Entscheidung betroffen ist (nur der Entscheider oder auch der Partner). So können wir den Einfluss von etwaigen "other-regarding concerns" und von Kommunikation auf die Entscheidungen isolieren. Wir beobachten, dass die Individuen risiko-averser entscheiden, wenn mit dem Partner kommuniziert werden kann. Wir beobachten jedoch keinen Einfluss der sozialen Situation auf Risikopräferenzen höherer Ordnung. Unsere Ergebnisse zeigen, dass die Mehrzahl der Entscheidungen über unterschiedliche soziale Situationen hinweg risikoavers, "prudent" und "temperate" ist.
    Keywords: experiment,individual decisions,group decisions,risk aversion,prudence,temperance
    JEL: C91 C92 D70 D81
    Date: 2014
  15. By: Daniela Di Cagno (LUISS Guido Carli); Arianna Galliera (LUISS Guido Carli); Werner Güth (Luiss Guido Carli and Frankfurt School of Finance and Management); Luca Panaccione (DEDI and CEIS, Università di Roma "Tor Vergata",)
    Abstract: Similar to Fischbacher and G¨achter (2010) we try to understand and explain the motivation of participants when contributing to a public good. In the Hybrid Public Good experiment each of two interacting contributors chooses an independent contribution level and three adjusted contribution levels when (s)he, as the only adjusting player, learns that the other’s independent contribution is smaller, equal or larger than the own one. We systematically vary the probability that one player can adjust, based on such qualitative information, but maintain that no adaptation at all and adaptation by only one occurs with positive probability. Adaptation is framed in two ways, once by additively changing the own independent contribution and once by stating new contribution levels. Surprisingly, there is a strong framing effect which increases with experience. Reacting to coinciding independent contributions implies impressive conformity in contributing. Reacting to higher, respectively lower independent contributions implies average upward, and, more strongly, downward adaptation.
    Keywords: Public goods, experiments, voluntary contribution mechanism
    JEL: C91 C72 H41
    Date: 2015–05–28
  16. By: Luminita Postelnicu; Niels Hermes; Roselia Servin Juarez
    Abstract: This paper investigates how social networks of group borrowers come into play in joint liability group lending. We use a large and original dataset containing 802 mapped social networks of borrowers from Pro Mujer Mexico. This is the first paper to look at external ties, i.e. social ties with individuals outside the borrowing group. Our main finding is that group lending with joint liability works when group borrowers use the informal risk insurance arrangement embedded in their external ties as guarantee for loan repayment. The extent to which this informal arrangement is used as guarantee is not decided by the borrower, but it is determined by the configuration of the group borrowers’ social networks, i.e. by their overlapping networks. These overlapping networks (or information channels) facilitate the diffusion of information into each other’s networks, and, thus, increases the credibility of the threat of losing one’s informal risk insurance arrangement in case of default. Our results show that the threat of losing the informal risk insurance arrangement embedded in one’s external ties matters for loan repayment even more than internal ties (i.e. ties between group members).
    Date: 2015–05–27

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