nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2018‒01‒15
sixteen papers chosen by
Stan C. Weeber
McNeese State University

  1. Communication and Information in Games of Collective Decision: A Survey of Experimental Results By Cesar Martinelli; Thomas R. Palfrey
  2. Norms in Bargaining: Evidence from Government Formation in Spain By Thomas Fujiwara; Carlos Sanz
  3. Resource Transfers to Local Governments: Political Manipulation and Voting Patterns in West Bengal By Anusha Nath; Dilip Mookherjee
  4. Collective Experimentation: A Laboratory Study By Mikhail Freer; Cesar Martinelli; Siyu Wang
  5. Resistance to Institutions and Cultural Distance: Brigandage in Post-Unification Italy By Giampaolo Lecce; Laura Ogliari; Tommaso Orlando
  6. Greed as a Source of Polarization By Livshits, Igor; Wright, Mark L. J.
  7. Linear voting rules By Grüner, Hans Peter; Tröger, Thomas
  8. The Arsenal of Democracy: Production and Politics During WWII By Paul W. Rhode; James M. Snyder, Jr.; Koleman Strumpf
  9. Taxation, redistribution and observability in social dilemmas By Daniel Brent; Lata Gangadharan; Anca Mihut; Marie Villeval
  10. Correlation and inequality in weighted majority voting games By Bhattacherjee, Sanjay; Sarkar, Palash
  11. Who Seeks Re-Election: Local Fiscal Restraints and Political Selection By Susana Peralta; João Pereira dos Santos
  12. Agency and institutions in organization studies By Abdelnour, Samer; Hasselbladh, Hans; Kallinikos, Jannis
  13. Collusive Benchmark Rates Fixing By Nuria Boot; Timo Klein; Maarten Pieter Schinkel
  14. Ratchet up or down? An experimental investigation of global public good provision in the United Nations Youth Associations Network By Gallier, Carlo; Kesternich, Martin; Löschel, Andreas; Waichman, Israel
  15. De Facto Control: Applying Game Theory to the Law on Corporate Nationality By Russell Stanley Q. Geronimo
  16. Enlarging the collective model of household behaviour: a revealed preference analysis By d’ASPREMONT Claude; DOS SANTOS FERREIRA Rodolphe

  1. By: Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Thomas R. Palfrey (Division of the Humanities and Social Sciences, California Institute of Technology)
    Abstract: We survey selectively lab experiments on voting games including pre-play activities such as communication and other forms of information release. We focus on a few areas that have received much attention in the last few decades, including costly voting and other collective action problems, coordination in elections with more than two alternatives, electoral competition and democratic accountability with imperfect Information, and legislative bargaining. We identify three forces that appear to be operating when communication is allowed: equilibrium, efficiency, and (underlying both) coordination.
    Date: 2017–12
  2. By: Thomas Fujiwara; Carlos Sanz
    Abstract: Theories of multilateral bargaining and coalition formation applied to legislatures predict that parties’ seat shares determine their bargaining power. We present findings that are difficult to reconcile with this prediction. We use data from 2,898 municipal Spanish elections in which two parties tie in the number of seats. The party with slightly more general election votes is substantially more likely to appoint the mayor (form the government). Since tied parties should, on average, have equal bargaining power, this identifies the effect of being the most voted due to a norm prescribing that “the most voted should form government.” The effect of being most voted is comparable in size to the effect of obtaining an additional seat. This norm binds behavior even when the second and third most voted parties can form a winning coalition that prefers the most voted not to appoint the mayor. Voters punish, in future elections, second most voted parties that appoint mayors, suggesting that they enforce the norm. We document a similar second-versus-third most voted effect and provide suggestive evidence of similar norms from 28 national European parliaments. A model where elections play a dual role (aggregating information and disciplining incumbents) and different equilibria (norms) can occur is consistent with our results and yields additional predictions.
    JEL: C7 C78 D72
    Date: 2017–12
  3. By: Anusha Nath (Federal Reserve Bank of Minneapolis and University of Minnesota); Dilip Mookherjee (Boston University)
    Abstract: This paper examines how electoral competition in parliamentary constituencies aects allocation of resources to local governments and subsequent impacts on voter behavior. We examine the consequences of treating the 2007 redistricting of electoral boundaries in rural West Bengal as a shock to political competition between the Left Front (LF) and Trinamool Congress (TMC) in the parliamentary constituency that a village is located in. 21 villages out of a sample of 89 villages were redistricted by a non-partisan Election Commission to a dierent constituency. Using electoral victory margins in the previous 2004 election as a measure of political competition, we find that resources transferred by LF-controlled district governments to LF-dominated village governments for citizen benefit programs increased significantly if moved to an electoral constituency where the LF was in a weaker competitive position. These changes in benefit flows help predict corresponding changes in vote shares, consistent with the view that resource transfers to GPs were motivated by electoral considerations. Stronger changes were exhibited for recurring private benefits (mainly employment program (NREGA) funds) compared to one-time private benefits and local public goods (water, housing, roads, BPL cards). The evidence is consistent with models of electoral opportunism based on pork-barrel politics and/or clientelistic relational contracts between parties and voters, particularly the latter.
    Date: 2017
  4. By: Mikhail Freer (Department of Economics, University of Leuven (KU Leuven).); Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Siyu Wang (For Motor Company)
    Abstract: We develop a simple model of collective experimentation and take it to the lab. In equilibrium, as in the recent work of Strulovici (2010), majority rule has a bias toward under experimentation, as good news for a minority of voters may lead a majority of voters to abandon a policy when each of them thinks it is likely that the policy will be passed by a future majority excluding them. We compare the behavior in the lab of groups under majority rule and under the optimal voting rule, which precludes voting in intermediate stages of the policy experiment. Surprisingly, performs better than the (theoretically) optimal voting rule. Majority rule seems to be more robust than other forms of voting when players make mistakes.
    Date: 2018–01
  5. By: Giampaolo Lecce (Cowles Foundation, Yale University); Laura Ogliari (Bocconi University); Tommaso Orlando (Bank of Italy)
    Abstract: We study how cultural distance affects the rejection of imposed institutions. To do so, we exploit the transplantation of Piedmontese institutions on Southern Italy that occurred during the Italian unification. We assemble a novel and unique dataset containing municipal-level information on episodes of brigandage, a form of violent uprising against the unitary government. We use the geographic distance from local settlements of Piedmontese descent as a proxy for the cultural distance between each municipality and the new rulers. We find robust evidence that cultural distance from the origins of the transplanted institutions is significantly associated with more intense resistance to these institutions. Our results further suggest that the rejection of the transplanted institutions may have a long-lasting effect on political participation.
    Keywords: Institutions, Institutional Transplantations, Culture, Social Unrest, Electoral Turnout
    JEL: N43 D74 P16 Z10
    Date: 2017–08
  6. By: Livshits, Igor (Federal Reserve Bank of Philadelphia); Wright, Mark L. J. (Federal Reserve Bank of Minneapolis)
    Abstract: The political process in the United States appears to be highly polarized: evidence from voting patterns finds that the political positions of legislators have diverged substantially, while the largest campaign contributions come from the most extreme lobby groups and are directed to the most extreme candidates. Is the rise in campaign contributions the cause of the growing polarity of political views? In this paper, we show that, in standard models of lobbying and electoral competition, a free-rider problem amongst potential contributors leads naturally to a divergence in campaign contributors without any divergence in candidates' policy positions. However, we go on to show that a modest departure from standard assumptions | allowing candidates to directly value campaign contributions (because of \ego rents" or because lax auditing allows them to misappropriate some of these funds) | delivers the ability of campaign contributions to cause policy divergence.
    Keywords: Polarization; Campaign Contributions; Agendas
    JEL: D72 H41
    Date: 2017–12–28
  7. By: Grüner, Hans Peter; Tröger, Thomas
    Abstract: How should a society choose between two social alternatives if participation in the decision process is voluntary and costly and monetary transfers are not feasible? Considering symmetric voters with private valuations, we show that it is utilitarian-optimal to use a linear voting rule: votes get alternativedependent weights, and a default obtains if the weighted sum of votes stays below some threshold. Standard quorum rules are not optimal. We develop a perturbation method to characterize equilibria in the case of small participation costs and show that leaving participation voluntary increases welfare for linear rules that are optimal under compulsory participation.
    Keywords: Mechanisms design , optimal voting rules , costly voting , compulsory voting , quorum rules
    JEL: D71 D72 D82
    Date: 2018
  8. By: Paul W. Rhode; James M. Snyder, Jr.; Koleman Strumpf
    Abstract: We study the geographic distribution of military supply contracts during World War II. This is a unique case, since over $3 trillion current day dollars was spent, and there were concerns that the country's future hinged on the war outcome. We find robust evidence consistent with the hypothesis that economic factors dominated the allocation of supply contracts, and that political factors---or at least winning the 1944 presidential election---were at best of secondary importance. General industrial capacity in 1939, as well as specialized industrial capacity for aircraft production, are strong predictors of contract spending across states. On the other hand, electoral college pivot probabilities are at best weak predictors of contract spending, and under the most plausible assumptions they are essentially unrelated to spending. This is true not only for total contract spending over the entire period 1940-1944, but also for shorter periods leading up to the election in November 1944, as well as for new facilities spending. That is, we find no evidence of an electoral cycle in the distribution of funds.
    JEL: D72 H41 H56 N42
    Date: 2017–12
  9. By: Daniel Brent (LSU - Louisiana State University - Louisiana State University [Baton Rouge]); Lata Gangadharan (Department of Economics and Business - Monash University); Anca Mihut (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Marie Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.
    Keywords: Common Pool Resource game, taxation mechanisms, observability, cooperation, heterogeneity, experiment
    Date: 2017–10–04
  10. By: Bhattacherjee, Sanjay; Sarkar, Palash
    Abstract: In a weighted majority voting game, the weights of the players are determined based on some socio-economic parameter. A number of measures have been proposed to measure the voting powers of the different players. A basic question in this area is to what extent does the variation in the voting powers reflect the variation in the weights? The voting powers depend on the winning threshold. So, a second question is what is the appropriate value of the winning threshold? In this work, we propose two simple ideas to address these and related questions in a quantifiable manner. The first idea is to use Pearson's Correlation Coefficient between the weight vector and the power profile to measure the similarity between weight and power. The second idea is to use standard inequality measures to quantify the inequality in the weight vector as well as in the power profile. These two ideas answer the first question. Both the weight-power similarity and inequality scores of voting power profiles depend on the value of the winning threshold. For situations of practical interest, it turns out that it is possible to choose a value of the winning threshold which maximises the similarity score and the also minimises the difference in the inequality scores of the weight vector and the power profile. This provides an answer to the second question. Using the above formalisation, we are able to quantitatively argue that it is sufficient to consider only the vector of swings for the players as the power measure. We apply our methodology to the voting games arising in the decision making processes of the International Monetory Fund (IMF) and the European Union (EU). In the case of IMF, we provide quantitative evidence that the actual winning threshold that is currently used is sub-optimal and instead propose a winning threshold which has a firm analytical backing. On the other hand, in the case of EU, we provide quantitative evidence that the presently used threshold is very close to the optimal.
    Keywords: Voting games, weighted majority, power measure, correlation, inequality, Gini index, coefficient of variation.
    JEL: C1 C15 D72 D78 Y1
    Date: 2017–12–06
  11. By: Susana Peralta (Nova School of Business and Economics, Universidade NOVA de Lisboa, Campus de Campolide, 1099-032 Lisbon, Portugal); João Pereira dos Santos (Nova School of Business and Economics, Universidade NOVA de Lisboa, Campus de Campolide, 1099-032 Lisbon, Portugal)
    Abstract: This paper analyses the consequences of local fiscal autonomy for political selection. We propose a model of political careers where both decisions to become candidates and seek re-election are endogenous. Market and political ability are private information, and the latter is revealed to the incumbent during her first period in office. Following an unanticipated reduction in the returns from holding office, we show that incumbents with high market ability are more likely to refrain from running again for office than their lower ability counterparts. We test this prediction exploiting an unexpected reduction in the upper bound of the municipal property tax rate, announced by the Portuguese Prime Minister in July 2008, just 15 months before the local elections. We rely on a comprehensive dataset on all Portuguese mainland municipalities for the 2005 and 2009 elections, including municipality and individual mayor characteristics. We follow a difference-in-differences strategy to show that affected mayors – those who were forced to decrease the property tax rate, and thus faced a sharp tax revenue decrease – are less likely to seek re-election. This effect is driven by high quality incumbents, as proxied by their previous occupation.
    Keywords: Political Selection, Fiscal Autonomy, Local Governments
    JEL: C23 D71 H71 H72
    Date: 2018–01
  12. By: Abdelnour, Samer; Hasselbladh, Hans; Kallinikos, Jannis
    Abstract: Agency and institutions are essential concepts within institutional theory. In this Perspectives issue, we draw on a select group of Organization Studies articles to provide an overview of the topic of agency and institutions. We first consider different ways of defining agency and institutions and examine their implications for institutional theory. We then analyse the relationship of actors and institutions through four lenses – the wilful actor, collective intentionality, patchwork institutions and modular individuals. Our analysis leads us to dissociate agency from individuals and view it as a capacity or quality that stems from resources, rights and obligations tied to the roles and social positions actors occupy. Roles and social positions are institutionally engineered. It is social actors qua occupants of roles and positions (not individuals) that enter the social ‘stage’ and exercise agency.
    Keywords: actors; agency; institutional theory; institutions; modular individuals
    JEL: J50
    Date: 2017–12–01
  13. By: Nuria Boot; Timo Klein; Maarten Pieter Schinkel
    Abstract: The fixing of the Libor and Euribor benchmark rates has proven vulnerable to manipulation. Individual rate-setters may have incentives to fraudulently distort their submissions. For the contributing banks to collectively agree on the direction in which to rig the rate, however, their interests need to be sufficiently aligned. In this paper we develop cartel theory to show how an interbank lending rates cartel can be sustained by preemptive portfolio changes. Exchange of information facilitates front running that allows members to reduce conflicts in their trading books. Designated banks then engage in eligible transactions rigging to justify their submissions. As the cartel is not able to always find stable cooperative submissions against occasional extreme exposure values, there is episodic recourse to non-cooperative quoting. Periods of heightened volatility in the rates may be indicative of cartelization. Recent reforms to broaden the class of transactions eligible for submission may reduce the level of manipulation, but can lead to more frequent collusive quoting.
    Keywords: Libor, Euribor, IRD, banking, cartel, insider trading
    JEL: E43 G14 G21 K21 L41
    Date: 2017
  14. By: Gallier, Carlo; Kesternich, Martin; Löschel, Andreas; Waichman, Israel
    Abstract: From a current perspective the Paris Agreement is not sufficient to limit the global mean temperature below 2êC above pre-industrial level as intended. The Agreement stipulates that parties review, compare and ratchet up efforts to combat climate change over time. Within this process, commitments heavily depend on what has been already achieved and this status-quo reflects an important reference point serving either as commitment advice or potential threat. We present an experimental study that is specifically designed to incorporate the effect of a status-quo via pre-existing contribution levels under endowment heterogeneity in a game in which participants make voluntary contributions to a public good. Our participants are sampled from the United Nations Youth Associations Network, representing participants from 51 countries. Members from developed and developing countries take decisions against the background of different initial levels of endowments and pre-existing contributions. Our analysis indicates that starting with ambitious pre-existing contribution levels can foster aggregate mitigation levels. Falling behind this status-quo contribution levels by reducing the public good appears to be a strong behavioral barrier. These observations might provide support for the basic structure of the Paris Agreement with Nationally Determined Contributions and the possibility to adjust them, even if a downward revision of national targets may not be precluded.
    Keywords: Paris Agreement,Nationally Determined Contributions,Ratched-up mechanism,International public goods,Online experiment
    JEL: H41 C91 F53 Q58
    Date: 2017
  15. By: Russell Stanley Q. Geronimo
    Abstract: One unexamined assumption in foreign ownership regulation is the notion that majority voting rights translate to 'effective control'. This assumption is so deeply entrenched in foreign investments law that possession of majority voting rights can determine the nationality of a corporation and its capacity to engage in partially nationalized economic activities. The fact, however, is that minority stockholders can possess a degree of voting power higher than what their shareholding size might suggest. Voting power is not the same as voting weight and is not measured simply by the proportion or number of votes a stockholder may cast in a stockholder meeting. This paper proposes and demonstrates a method for calculating 'effective control' based on given voting thresholds and voting weights. It also shows instances where the 'effective control' of a foreign minority stockholder appears to comply with foreign equity limitations, but has a 'real' voting power grossly beyond the allowable threshold.
    Date: 2017–12
  16. By: d’ASPREMONT Claude (Université catholique de Louvain, CORE, Belgium); DOS SANTOS FERREIRA Rodolphe (Université de Strasbourg)
    Abstract: We use a comprehensive model of strategic household behaviour in which the spouses’ expenditure on each public good is decomposed into autonomous spending and coordinated spending à la Lindahl. We obtain a continuum of semi-cooperative regimes parameterized by the relative weights put on autonomous spending, by each spouse and for each public good, nesting full cooperative and non-cooperative regimes as limit cases. Testing is approached through revealed preference analysis, by looking for rationalisability of observed data sets, with the price of each public good lying between the maximum and the sum of the hypothesized marginal willingnesses to pay of the two spouses. Once rationalised, an observed data set always allows to identify the sharing rule, except when both spouses contribute in full autonomy to some public good (a situation of local income pooling).
    Keywords: semi-cooperative household behaviour, revealed preference analysis, rationalisability, sharing rule identification
    JEL: D11 C72 H41
    Date: 2017–09–06

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