nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2016‒07‒30
twelve papers chosen by
Stan C. Weeber, McNeese State University

  1. Forming a Majority Coalition for Carbon Taxes Under a State-Contingent Updating Rule By Ross McKitrick; Jamie Lee
  2. Political Rebound Effects as Stumbling Blocks for Socio-ecological Transition By Karl Aiginger
  3. The co-evolution of innovation networks: Collaboration between West and East Germany from 1972 to 2014 By Jun, Bogang; Yi, Seung-Kyu; Buchmann, Tobias; Mueller, Matthias
  4. Corporate Governance of Financial Groups By OECD
  5. Dynamical Signatures of Collective Quality Grading in a Social Activity: Attendance to Motion Pictures By Juan V. ESCOBAR; Didier SORNETTE
  6. Acquiring information through peers By Bernard Herskovic; Joao Ramos
  7. Responding to Global Challenges in Food, Energy, Environment and Water: Risks and Options Assessment for Decision-Making By R. Quentin Grafton, Mahala McLindin, Karen Hussey, Paul Wyrwoll, Dennis Wichelns, Claudia Ringler, Dustin Garrick, Jamie Pittock, Sarah Wheeler, Stuart Orr, Nathanial Matthews, Erik Ansink, Alice Aureli, Daniel Connell, Lucia De Stefano, Kate Dowsley, Stefano Farolfi, Jim Hall, Pamela Katic, Bruce Lankford, Hannah Leckie, Matthew McCartney, Huw Pohlner, Nazmun Ratna, Mark Henry Rubarenzya, Shriman Narayan Sai Raman, Kevin Wheeler and John Williams
  8. To deter or to moderate? Alliance formation in contests with incomplete information By Kai A. Konrad; Florian Morath
  9. Polarization and Corruption in America By Mickael Melki; Andrew Pickering
  10. Anti-corruption policy-making, discretionary power, and institutional quality An experimental analysis By Amadou Boly; Gillanders
  11. Priming ideology: Why Presidential Elections affect U.S. Judges By Chen, Daniel L.
  12. ‘Nudging’ Risky Decision-Making: A Note on the Causal Influence of Information Order By Jason A. Aimone; Sheryl Ball; Brooks King-Casas

  1. By: Ross McKitrick (Department of Economics and Finance, University of Guelph); Jamie Lee (Department of Economics and Finance, University of Guelph)
    Abstract: Uncertainty and political polarization over global warming make it difficult to achieve a stable majority coalition supporting carbon taxes, especially since expectations about the future optimal values sharply diverge. We present an alternative approach in which the tax path is not announced in advance but is set to track observed future temperatures. Agents thus form expectations which imply the tax path will be correlated with their preferred price trajectory. Whereas greater variance in beliefs about future global warming undermines support for a compromise policy, the state-contingent proposal attracts majority support irrespective of the divergence of views, and even has robustness properties to strategic voting by dishonest agents.
    Keywords: Carbon tax, State-contingent model, Majority voting, Climate change, Uncertainty
    JEL: Q54 Q58 H23 D72
    Date: 2016
  2. By: Karl Aiginger (WIFO)
    Abstract: This paper analyses why many citizens believe that the current social and economic system is far from optimal, but do not vote for a change in the desired direction in election processes. There is an increasing erosion of central political parties, and new populist parties are appearing at both extremes of the political spectrum. They are good at attracting angry and disappointed voters but are unable to offer consistent concepts that can produce a social economic system with efficiency, social inclusion and environmental sustainability. Since populist parties agree on what they do not want, and not where to go, both right-wing and left-wing parties are able to cooperate against the prevailing system.
    Date: 2016–07–20
  3. By: Jun, Bogang; Yi, Seung-Kyu; Buchmann, Tobias; Mueller, Matthias
    Abstract: This paper describes the co-evolution of East and West German innovation networks after the German reunification in 1990 by analyzing publication data from 1972 to 2014. This study uses the following four benchmark models to interpret and classify German innovation networks: the random graph model, the small-world model, the Barabási-Albert model, and the evolutionary model. By comparing the network characteristics of empirical networks with the characteristics of these four benchmark models, we can increase our understanding of the particularities of German innovation networks, such as development over time as well as structural changes (i.e., new nodes or increasing/decreasing network density). We first confirm that a structural change in East-West networks occurred in the early 2000s in terms of the number of link between the two. Second, we show that regions with few collaborators dominated the properties of German innovation networks. Lastly, the change in network cliquishness, which reflects the tendency to build cohesive subgroups, and path length, which is a strong indicator of the speed of knowledge transfer in a network, compared with the four benchmark models show that East and West German regions tended to connect to new regions located in their surroundings, instead of entering distant regions. Our findings support the German federal government's continuous efforts to build networks between East and West German regions.
    Keywords: Innovation networks,Network dynamics,German reunification
    Date: 2016
  4. By: OECD
    Abstract: Companies today, in particular banks, insurance companies and other financial institutions, increasingly operate their businesses in a group structure. These financial groups have a growing presence in markets worldwide and the economy as a whole. To do business effectively and efficiently in group structures, corporate groups should be managed in a holistic and integrated manner, in much the same way as an enterprise. Good governance of corporate groups should not therefore be very different from that of a corporation with many departments and branches. Nonetheless, the idiosyncratic risks that group structures bring about may require particular attention be paid to the governance of corporate groups. Such risks include the complexity of group structures and responsibilities among member companies in a multi-layered ownership structure across borders. The legal status of subsidiary companies, which is different from departments or branches of a corporation, should be respected. The governance of corporate groups needs to address inherent issues such as the dilemma of subsidiary boards’ loyalty to the interests of the subsidiary versus the broader interests of the group, and the risks associated with related party transactions. In the case of financial groups, particular consideration should be given to the interests of depositors and insurance policyholders of each financial subsidiary. Financial regulation increasingly establishes requirements for the governance responsibilities of the boards of financial subsidiaries, while emphasising the overall responsibility of the ultimate parents of financial groups.
    Keywords: financial regulation, corporate governance, corporate groups, financial groups, group structure
    JEL: G30 G32 G34 G38
    Date: 2016–07–28
  5. By: Juan V. ESCOBAR (Universidad Autónoma Metropolitana-Iztapalapa and Universidad Nacional Autónoma de México); Didier SORNETTE (ETH Zurich and Swiss Finance Institute)
    Abstract: We investigate the laws governing people´s decisions and interactions by studying the collective dynamics of a well-documented social activity for which there exist ample records of the perceived quality: the attendance to movie theaters in the US. We picture the flows of attendance as impulses or "shocks" driven by external factors that in turn can create new cascades of attendances through direct recommendations whose effectiveness depends on the perceived quality of the movies. This corresponds to an epidemic branching model comprised of a decaying exponential function determining the time between cause and action, and a cascade of actions triggered by previous ones. We find that the vast majority of the ~3,500 movies studied fit our model remarkably well. From our results, we are able to translate a vague concept such as quality into a probability of emulation of this individual activity, and from it we build concrete quantitative predictions about the performance of a movie as a function of its perceived quality. Our analysis opens up the possibility of understanding other collective dynamics for which the perceived quality of the action is also known.
    Keywords: Complex Systems, Hawkes Process, Social Dynamics, Epidemic Branching Model, Perceived Quality, Movies
    JEL: C40 C53 C93 D12 D71
  6. By: Bernard Herskovic (UCLA Anderson School of Management); Joao Ramos (NYU)
    Abstract: We study information acquisition from peers when agents’ actions balance adaptation and coordination motives. Agents acquire information personally and may obtain additional information by connecting to other agents. Although equally informative regarding adaptation, the source’s relative position in the information structure is relevant to form expectations about actions of other players. In our setting, information sources are not perfectly substitutable, and the information of an “opinion maker†—an agent whose information is more public—is more informative of how others act. We show that, when players choose their connections, (i) it is always preferable to connect to opinion makers, and (ii) opinion makers have less incentives to form links. These two results characterize the endogenous shape of the network: Any strict equilibrium of the network formation game generates a hierarchical information structure. Furthermore, if the marginal cost of acquiring information is increasing, the information structure is “core-periphery†. We take advantage of the simplicity of the equilibrium information structure to provide two applications. First, we analyze how much of the aggregate volatility of forecast can the information structure account for. Second, we study the origins of leadership: how individual characteristics influence the role of the agent in the information structure.
    Date: 2016
  7. By: R. Quentin Grafton, Mahala McLindin, Karen Hussey, Paul Wyrwoll, Dennis Wichelns, Claudia Ringler, Dustin Garrick, Jamie Pittock, Sarah Wheeler, Stuart Orr, Nathanial Matthews, Erik Ansink, Alice Aureli, Daniel Connell, Lucia De Stefano, Kate Dowsley, Stefano Farolfi, Jim Hall, Pamela Katic, Bruce Lankford, Hannah Leckie, Matthew McCartney, Huw Pohlner, Nazmun Ratna, Mark Henry Rubarenzya, Shriman Narayan Sai Raman, Kevin Wheeler and John Williams
    Abstract: We analyse the threats of global environmental change, as they relate to food security. First, we review three discourses: (i) ‘sustainable intensification’, or the increase of food supplies without compromising food producing inputs, such as soils and water; (ii) the ‘nexus’ that seeks to understand links across food, energy, environment and water systems; and (iii) ‘resilience thinking’ that focuses on how to ensure the critical capacities of food, energy and water systems are maintained in the presence of uncertainties and threats. Second, we build on these discourses to present the causal, risks and options assessment for decision-making process to improve decision-making in the presence of risks. The process provides a structured, but flexible, approach that moves from problem diagnosis to better risk-based decision-making and outcomes by responding to causal risks within and across food, energy, environment and water systems.
    Keywords: food security, sustainable intensification, nexus, resilience, sustainable development
    Date: 2016–07–01
  8. By: Kai A. Konrad; Florian Morath
    Abstract: We consider two players' choice about the formation of an alliance ahead of conflict in a framework with incomplete information about the strength of co-players. When deciding on alliance formation, players anticipate the self-selection of other players and the informational value of own and other players' choices. In the absence of these signaling effects, strong players have an incentive to stand alone, which leads to a separating equilibrium. This separating equilibrium can be destabilized by deception incentives if beliefs are updated on the basis of endogenous alliance formation choices. Weak players may find it attractive to appear strong in order to deter competitors from positive effort choices. Strong players may find it attractive to appear weak in order to give their competitors a false sense of security and then beat them with little effort. Moreover, appearing weak allows players to free-ride when alliances are formed.
    Keywords: alliance; incomplete information; endogenous formation; all-pay contest
    JEL: D72 D74
    Date: 2015–12
  9. By: Mickael Melki; Andrew Pickering
    Abstract: The hypothesis that ideological polarization reduces corruption is tested using panel data from the US. To identify the causal effect of polarization, polarization is instrumented with lagged political position-taking in geographically neighboring states. Polarization is found to significantly reduce corruption. Consistent with the idea that ideological distance imposes additional electoral discipline on politicians, the beneficial effect of polarization is found to increase when political competition is high and when incumbent governors are eligible to run for office.
    Keywords: Corruption, ideological polarization
    JEL: K4 H0
    Date: 2016–07
  10. By: Amadou Boly; Gillanders
    Abstract: We analyse policy makers. incentives to fight corruption under different institutional qualities. We find that .public officials., even when non-corrupt, significantly distort anticorruption institutions by choosing a lower detection probability when this probability applies to their own actions (legal equality), compared to a setting where it does not (legal inequality). As .public officials. are on average equally corrupt with or without legal equality, an institutional setting with legal equality can be considered worse in reducing corruption. Finally, corruption is significantly lower when the detection probability is exogenously set, suggesting that the institutional power to choose detection can itself be corruptive.
    Keywords: anti-corruption, embezzlement, experimental economics, institutions, policy-making
    Date: 2016
  11. By: Chen, Daniel L.
    Abstract: U.S. Presidential elections polarize U.S. Courts of Appeals judges, doubling their dissents, partisan voting, and lawmaking along partisan lines and increasing their reversal of District Court decisions (Berdejo and Chen 2016). Dissents are elevated for ten months before the Presidential elections. I develop a theoretical model showing that the salience of partisan identities drives these behavioral patterns. The polarizing effects are larger in close elections, non-existent in landslide elections, and reversed in wartime elections. I link judges to their states of residence and exploit variation in the timing and importance of a state during the electoral season. Dissents are elevated in swing states and in states that count heavily to winning the election, when these states are competitive. U.S. Senate elections, the timing of which also varies by state, further elevate dissents. I link administrative data on case progression and frequency of campaign advertisements in judges’ states of residence to proxy for a state’s importance during Presidential primaries. Dissents occur shortly before publication, increase with monthly increases in campaign ads, and appear for cases whose legal topic, economic activity, is most heavily covered by campaign ads. Finally, I link the cases to their potential resolution in the Supreme Court. Dissents before elections appear on more marginal cases that cite discretionary miscellaneous issues and procedural (rather than substantive) arguments, which the Supreme Court appears to recognize and only partly remedy. The behavioral changes of unelected Courts of Appeals judges are larger than the behavioral changes of elected judges running for re-election.
    Keywords: Judicial Decision-Making, Group Decision-Making, Moral Decision-Making, Salience
    JEL: D7 K00 Z1
    Date: 2016–07
  12. By: Jason A. Aimone; Sheryl Ball; Brooks King-Casas
    Abstract: Recent studies have suggested that there may be a correlation between the order in which decision-makers collect information about risky gambles and their tendency to make expected value maximizing decisions. In this work we present results from an experiment designed to establish causality by exogenously manipulating the order in which participants view information about probabilities and payoffs. We find that there is a relationship between information presentation and the amount of risk participants take. This suggests that the choice architecture for real world risky decision making may have both intended and unintended consequences.
    Keywords: Risky Decision Making, Expected Value Maximization, Nudging
    Date: 2016

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