nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2016‒07‒02
ten papers chosen by
Stan C. Weeber, McNeese State University

  1. Internet and Voting in the Web 2.0 Era: Evidence from a Local Broadband Policy By Samuele Poy; Simone Schüller
  2. Policy and Politics: Trade Adjustment Assistance in the Crossfire By Lainez, Christopher; Matschke, Xenia; Yotov, Yoto
  3. Extremists into Truth-tellers: Information Aggregation under Asymmetric Preferences By Jean-Philippe BONARDI; Olivier CADOT; Lionel COTTIER
  4. How Brexit affects European Union power distribution By Laszlo A. Koczy
  5. Voting Behavior on Carbon Pollution from Power Plants By Joshua Hall; Elham Erfanian; Caleb Stair
  6. Thanks, but no thanks: Companies’ response to R&D tax credits By Daniel Neicu; Stijn Kelchtermans; Peter Teirlinck
  7. Relational Altruism and Giving in Social Groups By Scharf, Kimberley; Smith, Sarah
  8. Under Uncertainty, Over Time and Regarding Other People: Rationality in 3D By Dorian Jullien
  9. The Silent Treatment By de Clippel, Geoffroy; Eliaz, Kfir; Rozen, Kareen
  10. "Solving Backward Stochastic Differential Equations by Connecting the Short-term Expansions" By Masaaki Fujii; Akihiko Takahashi

  1. By: Samuele Poy; Simone Schüller
    Abstract: This article analyzes the impact of a local broadband expansion policy on electoral turnout and party vote share. We exploit a unique policy intervention involving staged broadband infrastructure installation across rural municipalities in the Province of Trento (Italy), thus generating a source of exogenous (spatial and temporal) variation in the provision of advanced broadband technology (ADSL2+). Using a difference-in-differences strategy, we find positive effects of broadband availability on overall electoral turnout at national parliamentary elections. Party vote share analysis shows significant shifts across the ideological spectrum. These shifts, however, are likely transitory rather than persistent. Placebo estimations support a causal interpretation of our results. We provide further evidence that broadband availability is linked to actual adoption in that the broadband policy increased overall Internet and broadband take-up among private households.
    Keywords: Higher Broadband Internet, Political Participation, Voting Behavior, Quasi-Natural Experiment
    JEL: D72 L82 L86
    Date: 2016–06
  2. By: Lainez, Christopher (School of Economics Drexel University); Matschke, Xenia (University of Trier); Yotov, Yoto (School of Economics Drexel University)
    Abstract: The United States introduced Federal Trade Adjustment Assistance (TAA) as part of the 1962 Trade Expansion Act to dampen the adverse impact of increased trade on workers. Applications to receive TAA require approval from the Department of Labor. Guided by the technical criteria used by the U.S. government in the official TAA certification process, we capitalize on a rich multi-dimensional panel dataset to quantify the effects of political influence on the TAA certification decision. We find that political factors such as party affiliation of the President, voting outcomes at the state level, and whether a petition was certified in an election year influence the TAA certification outcome. Those effects remain even when including a wide array of controls and a rich set of fixed effects.
    Keywords: trade adjustment assistance; political economy; trade protection
    JEL: F13 F14 F16
    Date: 2015–12–26
  3. By: Jean-Philippe BONARDI (FERDI); Olivier CADOT (Faculté des hautes études commerciales - Université de Lausanne); Lionel COTTIER (FERDI)
    Abstract: We set up a model of costly information production between two lobbies, a firm and a consumer group, competing for influence over an imperfectly informed but benevolent government. The government is endowed with a parametric amount of information and chooses the best policy from a finite, countable feasible set given the information available (its own and that forwarded by lobbies). Lobbies have asymmetric preferences, the firm being a “high-stakes” player with relatively extreme preferences and the consumer group a “low-stakes” player with preferences more aligned with the government’s. We show that lobbies spend too much on information production in any Nash equilibrium despite a timing-game structure in which the lobbies are free to choose the order of play. We also show that in some parameter configurations, the firm insures against a consumer win by forwarding unbiased information to the government, in spite of its own extreme preferences and high stakes. The resulting informational rent enables the government to adopt moderate policies aligned with its own (i.e. societal) preferences, suggesting a new way in which lobby competition can produce good policies even when the government is imperfectly informed.
    Keywords: Game theory, lobbying model, imperfect information, timing game
    JEL: H4 K0 P1 D72 F13
    Date: 2016–03
  4. By: Laszlo A. Koczy (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Keleti Faculty of Business and Management Óbuda University)
    Abstract: The possible exit of the United Kingdom from the European Union will have profound economic and political effects. Here we look at a particular aspect, the power distribution in the Council of the European Union. Since the Lisbon treaty the exit does not require new negotiations as the success of a voting initiative only depends on the number and total population of the supporting member states. Using the Shapley-Shubik power index we calculate the member states' powers with and without the United Kingdom and update earlier power forecasts using the Eurostat's latest population projections. There is a remarkably sharp relation between population size and the change in power: Brexit increases the largest members', while decreases the smallest ones' powers.
    Keywords: European Union, Council of the European Union, qualified majority voting, power index, a priori voting power, demographics
    JEL: C71 D72
    Date: 2016–05
  5. By: Joshua Hall (West Virginia University, Department of Economics); Elham Erfanian (West Virginia University, Agricultural and Natural Resource Economics); Caleb Stair (West Virginia University, Agricultural and Natural Resource Economics)
    Abstract: Environmental regulation is a polarizing issue. In 2014, a bill came to a vote in the U.S. House of Representatives that would limit the powers of the Environmental Protection Agency. This empirical note identifies the characteristics that influenced the voting behavior of House Representatives on this bill. Political party, educational background, the location quotient of the mining industry in the representative’s state, and the amount of emissions in the Representative’s state are considered. A member’s political party is the primary factor influencing voting behavior but the location quotient of the mining industry also plays an important role.
    Keywords: EPA regulations; carbon emissions; fossil fuel-fired; electric utility generating
    JEL: H7 Q4 Q58
    Date: 2016–06
  6. By: Daniel Neicu; Stijn Kelchtermans; Peter Teirlinck
    Abstract: This paper starts from the observation that the majority of firms in Belgium that were eligible for a newly introduced R&D tax credit system does not use it, or is slow to adopt, despite significant potential cost savings. We hypothesize that the R&D support landscape is complex for firms to navigate and that they may cope by relying on their peers’ behaviour to inform their own adoption decisions. We identify endogenous peer effects in industry- and location-based peer groups by exploiting the intransitivity in firms’ peer group networks as well the variation in peer group sizes. The results show that firms’ decisions to use R&D tax credits are indeed influenced by the choices of their peers, primarily in the time window following the introduction. Our analysis complements the literature on peer effects in firm decision making and suggests improvements for the communication of new public support measures for business R&D.
    Keywords: R&D tax credits, peer effects, information diffusion, social interactions
    Date: 2016–06
  7. By: Scharf, Kimberley; Smith, Sarah
    Abstract: Much fundraising is done by individuals within existing social groups. Exploiting a unique dataset, we demonstrate (i) a positive relationship between social group size and the number of donations; (ii) a negative relationship between group size and the size of individual donations; (iii) no clear relationship between group size and the total amount raised. Free riding with respect to the activity being funded cannot explain the relationship between group size and donation size, since the number of social group members is only a subset of total contributors. Instead, the findings are consistent with the notion that giving in social groups is motivated by "relational altruism" .
    Keywords: Online giving; Fundraising; Social groups; Donations; Charity; Altruism
    JEL: D64 H31 Z1
    Date: 2016–06
  8. By: Dorian Jullien (University of Nice Sophia Antipolis; GREDEG CNRS)
    Abstract: This paper scrutinizes behavioral economics' challenges to the standard accounts of economic behaviors within and across three dimensions: under uncertainty, over time and regarding other people. ‘Within' dimensions means that decision problems are of the form, e.g., ‘a consequence for sure vs. a bigger consequence with uncertainty' or ‘a consequence now vs. a bigger consequence later', by contrast with decision problems that cut ‘across' dimensions as in, e.g., ‘a consequence for sure but later vs. another consequence now but with uncertainty'. The proposed distinction between challenges within and across dimensions is more than conceptual, it also delimits a historical rupture between two periods that are nontrivial regarding the debates between behavioral and standard economics. The classical challenges posed by Kahneman, Tversky, Thaler and others focused on interactions within dimensions, posing problems to standard models. The more recent challenges from interactions across dimensions are posing problems to to both standard and behavioral economists' models. This paper proposes a systematic contrasts between the three dimensions, in both the challenges within and across the three dimensions, i.e., it proposes to ‘see rationality in 3D', in order to further our understanding of the contemporary theoretical, empirical and methodological stakes underlying these debates. Three methodological issues are discussed throughout: one that is not discussed elsewhere in the reflexive literature, namely the role of language in economic rationality, which we try to connect with the two classical ones around behavioral economics, namely, the issue of interdisciplinary between economics and psychology and the positive/normative issue within models of individual behaviors. With respect to the latter, we suggest that there is a slow historical shift from a primacy of risk over time over social preferences in the making of economists' value judgments of rationality and irrationality, to a competing primacy of time over risk over social preferences.
    Keywords: behavioral economics, economic rationality, expected utility, prospect theory, exponential discounting, hyperbolic discounting, self-interest, other-regarding behaviors, economic methodology, history of economics
    JEL: A12 B21 B41 D01 D03 D81 D90 D64
    Date: 2016–06
  9. By: de Clippel, Geoffroy; Eliaz, Kfir; Rozen, Kareen
    Abstract: Information overload is costly to organizations. Limited cognitive resources, multiple obligations, and short deadlines can lead a principal to overlook important ideas from subordinates. We propose a stylized model to highlight a remedy to this problem that should be relevant in many contexts. Since interactions in organizations are often repeated over time, there may be ways to incentivize agents to speak up only when they have something important to communicate; that is, to be discerning. One of the principal's jobs is then to steer the organization in this direction. In our model, a principal's attention is repeatedly sought by multiple agents, each eager for his ideas to be implemented. An idea's quality stochastically affects the principal's profit, and agents' abilities to generate good ideas may be private information. The principal is unable to review proposals before choosing one each period. She can provide incentives only through her selection rule among proposals, but cannot commit to this rule in advance. We show how she may discipline agents to exercise restraint, achieving her first-best in an intuitive belief-free equilibrium. Whether first best is achievable hinges on the worst possible agent, the organization's `weakest link.' Selecting ideas in our model is reminiscent of multi-armed bandit problems, with the new feature that an arm's availability is a strategic decision each round. Our analysis also shows that such problems admit simple, robust solutions.
    Keywords: belief-free equilibrium; limited attention; mechanism-design without commitment; multi-armed bandits; organizations
    Date: 2016–06
  10. By: Masaaki Fujii (Faculty of Economics, The University of Tokyo); Akihiko Takahashi (Faculty of Economics, The University of Tokyo)
    Abstract: We investigate general collective decision problems related to hidden action and hidden information. We assume that each agent has a wide availability of action choices at an early stage, which provides significant externality effects on the other agent’s valuations in all directions. We characterize the class of all mechanisms that solve the hidden action problem, and demonstrate equivalence properties in the ex-post term.Importantly, we find that pure Groves mechanisms, defined as the simplest form of canonical Groves mechanisms, are the only efficient mechanisms that solve such hidden action problems. We argue that the resolution of the hidden action problem automatically resolves the hidden information problem.

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