nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2018‒05‒21
fourteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Political disagreement and information in elections By Alonso, Ricardo; Câmara, Odilon
  2. The flip side of power By Friedel Bolle; Philipp E. Otto
  3. A Two-Party System under the Proportional Rule is Possible: Strategic Voting in the Lab By Francesco, De Sinopoli; Giovanna, Iannantuoni; Valeria, Maggian; Stefania, Ottone;
  4. Simultaneous and Sequential Voting under General Decision Rules By Friedel Bolle
  5. Do CEOs affect employees' political choices? By Ilona Babenko; Viktar Fedaseyeu; Song Zhang
  6. CONDITIONS WHERE THE RULED CLASS UNITES FOR THE REVOLUTION -applicability of a game theory on social dilemmas- By Hiroshi Onishi
  7. How does Altruism Enlarge a Climate Coalition? By Lin, Yu-Hsuan
  8. Group Size, Collective Action and Complementarities in Efforts By Cheikbossian, Guillaume; Fayat, Romain
  9. A revelation principle for obviously strategy-proof implementation By Mackenzie, Andrew
  10. Social Norms, Endogenous Sorting and the Culture of Cooperation By Ernst Fehr; Tony Williams
  12. Returning to the Golden Rule of Balanced Budgets: The Institutional and Political Economy of Restricting Public Deficits and Debt By Bernard Dafflon
  13. Recursive Representation in the Representative System By Mansbridge, Jane
  14. Global Crises and Populism: the Role of Eurozone Institutions By Luigi Guiso; Helios Herrera; Massimo Morelli; Tommaso Sonno

  1. By: Alonso, Ricardo; Câmara, Odilon
    Abstract: We study the role of re-election concerns in incumbent parties' incentives to shape the information that reaches voters. In a probabilistic voting model, candidates representing two groups of voters compete for office. In equilibrium, the candidate representing the majority wins with a probability that increases in the degree of political disagreement — the difference in expected payoffs from the candidates' policies. Prior to the election, the office-motivated incumbent party (IP) can influence the degree of disagreement through policy experimentation — a public signal about a payoff-relevant state. We show that if the IP supports the majority candidate, then it strategically designs this experiment to increase disagreement and, hence, the candidate's victory probability. We define conditions such that the IP chooses an upper-censoring experiment and the experiment's informativeness decreases with the majority candidate's competence. The IP uses the experiment to increase disagreement even when political disagreement is due solely to belief disagreement.
    Keywords: Disagreement; Bayesian persuasion; Strategic experimentation; Voting
    JEL: D72 D83
    Date: 2016–11–02
  2. By: Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Philipp E. Otto (European University Viadrina, Frankfurt (Oder))
    Abstract: Based on power indices as well as intuition, the chairman of a committee whose vote decides in the case of a draw has more power than ordinary voters. Even more powerful are members with veto right, who can block a majority vote. We pose the question whether giving one of the players in a majority voting game more power is beneficial for the powerful individual and/or the community. We find that, in our environment, the introduction of a powerful player is efficiency-improving, but that powerful players earn less than their ordinary co-players. Our environment is a Binary Threshold Public Good game which can also be interpreted as a general non- cooperative voting game. We supplement our investigation by successfully explaining behavior as a finite mixture of mostly equilibrium strategies.
    Keywords: veto power; tie-breaking power; binary threshold public goods; experiment
    JEL: D71 D72 H41
    Date: 2017–03
  3. By: Francesco, De Sinopoli; Giovanna, Iannantuoni; Valeria, Maggian; Stefania, Ottone;
    Abstract: In this study, we implement a series of voting games in the laboratory to test whether a strategic voting behavior in a proportional system would arise and induce a two-party system. In each voting game, a finite number of subjects with single-peaked preferences, uniformly distributed on a 0–20 line, are asked to vote for a number within the interval 0–20. The policy outcome is the average of the chosen numbers—a realistic representation of a compromise between parties in a parliament elected through the proportional rule. Our main result shows that polarization and strategic voting occur in the proposed proportional rule scenario. Moreover, experience and information concerning the electoral outcome of the previous period drive individuals to opt for strategic voting.
    Keywords: Proportional representation, strategic voting, polarization, political compromise, laboratory experiment, information
    JEL: C91 C92 D72
    Date: 2018–05–16
  4. By: Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: In an economic theory of voting, voters have positive or negative costs of voting in favor of a proposal and positive or negative benefits from an accepted proposal. When votes have equal weight then simultaneous voting mostly has a unique pure strategy Nash equilibrium which is independent of benefits. Voting with respect to (arbitrarily small) costs alone, however, often results in voting against the “true majority” (Groseclose and Milyo, 2010). If voting is sequential as in the roll call votes of the US Senate then, in the unique subgame perfect equilibrium, the ”true majority” prevails (Groseclose and Milyo, 2013). It is shown that the result for sequential voting holds also with different weights of voters (shareholders), with multiple necessary majorities (EU decision making), or even more general rules. Simultaneous voting in the general model has more differentiated results.
    Keywords: Voting, free riding, binary decisions, unique pure strategy equilibria
    JEL: H41 D71
    Date: 2018–05
  5. By: Ilona Babenko; Viktar Fedaseyeu; Song Zhang
    Abstract: We analyze whether CEOs influence their employees’ political choices whether this influence has implications for firm value. We find that employees donate three times more money to CEO-supported political candidates than to other candidates. This relation also holds around CEO departures, including plausibly exogenous departures due to retirement or death. Equity returns are significantly higher when CEO-supported candidates win elections than when employee-supported candidates win. Further, CEO influence is strongest in firms with the largest potential benefits from political participation and firms that explicitly advocate for political candidates. Our results suggest that CEOs are a political force that benefits shareholders
    Keywords: campaign contributions, elections, voting, CEOs, political activism, PACs, political candidates, voter turnout
    JEL: D72 P48 G30
    Date: 2017
  6. By: Hiroshi Onishi (Faculty of Economics, Keio University)
    Abstract: Revolutions, typical cases of crucial social transformations, cannot be realized successfully without a large number of activists. Therefore, creating conditions favorable for acquiring enough participants should be an important topic of Marxist social science. In particular, this problem includes the "free-ride," because the benefits of revolutionaries' activities are gained not only by the activists but also by all other members. The paper analyzes problems such as this one, applying non-cooperative game theory to social dilemma problems. This leads to some interesting results. In this research, the problem of the workers' choice between unity or freeride is first defined using numerical examples of the gain structure. It is defined again in a more generalized form using other parameters. In so doing, we express both the cost of participating in the movement and the gains from the concession of the ruling class. Because this analysis focuses on the importance of the number of participants, the concession of the ruling class is framed as a function of the number of participants. The results of this analysis revealed that the economic foundation and superstructure accurately correspond in some game structures but not in others. In other words, the social dilemma presents either as a case of prisoners' dilemma or as a chicken game. Furthermore, this paper analyzes the influence of group size, and it was revealed that groups with a large number of members, such as a ruling class, find it particularly difficult to unite. This phenomenon is called the "large group dilemma." In these ways, this research shows that the aforementioned type of game theory can be used to analyze the difficulties and possibilities of social movements.
    Keywords: revolution, historical materialism, social dilemma, large group, chicken game
    JEL: B14 C72 D74 P16
    Date: 2018–04–25
  7. By: Lin, Yu-Hsuan
    Abstract: This study examines the relationship between individual altruistic attitudes and the incentives of participating in a climate coalition by using a laboratory experiment. A dominant strategy solution design assigns players into two roles in the game: critical and non-critical players. The critical players have a weakly dominant strategy of joining and are essential to an effective coalition. On the other hand, the non-critical players have a dominant strategy of not-joining. The theory suggests that strong altruism would lead non-critical players to join a coalition. The experimental evidence supports that coalitions are therefore enlarged from the self-interest prediction. However, the result indicates that the individual incentives for participation seem to be negatively correlated with altruistic attitudes. It implies the stronger the altruistic tendencies the less likely individuals are to join a coalition. In other words, coalition formation may be expanded by egoistic players.
    Keywords: International environmental agreement, social preference, altruism, experimental design
    JEL: C91 D64 H41 Q54
    Date: 2018–05
  8. By: Cheikbossian, Guillaume; Fayat, Romain
    Abstract: We revisit the group size paradox in a model where two groups of different sizes compete for a prize exhibiting a varying degree of rivalry and where group effort is given by a CES function of individual e¤orts. We show that the larger group can be more successful than the smaller group if the degree of complementarity is sufficiently high relative to the degree of rivalry of the prize.
    Keywords: group size paradox; group contest; complementarity; (impure) public good
    JEL: D72 D74
    Date: 2018–05
  9. By: Mackenzie, Andrew (General Economics 1 (Micro))
    Abstract: We prove that if a stochastic (social choice) rule has an obviously strategy-proof (OSP) implementation (Li, 2016), then it has such an implementation through a randomized round table mechanism, where the administrator randomly selects a game form in which the agents take turns making public announcements about their private information. When restricted to deterministic rules, our result improves upon other recent revelation principles by relaxing all recall requirements and by allowing all game trees compatible with normal forms (Alós-Ferrer and Ritzberger, 2016); we also establish robustness to player randomization using novel solution concepts involving mixed strategies and behavioral strategies. We use our result to provide a justification for ordinal mechanisms in the spirit of Carroll (2017), and we provide a simple characterization of the deterministic rules with OSP-implementations using deterministic round table mechanisms and ordinary strategy-proofness.
    Keywords: economics, mathematical economics, microeconomics
    JEL: D82 D71
    Date: 2018–05–08
  10. By: Ernst Fehr; Tony Williams
    Abstract: Throughout human history, informal sanctions by peers were ubiquitous and played a key role in the enforcement of social norms and the provision of public goods. However, a considerable body of experimental evidence suggests that informal peer sanctions cause large collateral damage and efficiency costs. This raises the question whether peer sanctioning systems exist that avoid these costs and whether other, more centralized, punishment systems are superior and will be preferred by the people. Here, we show that welfare-enhancing peer sanctioning without much need for costly punishment emerges quickly if we introduce two relevant features of social life into the experiment: (i) subjects can migrate across groups with different sanctioning institutions and (ii) they have the chance to achieve consensus about normatively appropriate behavior. The exogenous removal of the norm consensus opportunity reduces the efficiency of peer punishment and renders centralized sanctioning by an elected judge the dominant institution. However, if given the choice, subjects universally reject peer sanctioning without a norm consensus opportunity – an institution that has hitherto dominated research in this field – in favor of peer sanctioning with a norm consensus opportunity or an equally efficient institution with centralized punishment by an elected judge. Migration opportunities and normative consensus building are key to the quick emergence of an efficient culture of universal cooperation because the more prosocial subjects populate the two efficient institutions first, elect prosocial judges (if institutionally possible), and immediately establish a social norm of high cooperation. This norm appears to guide subjects’ cooperation and punishment choices, including the virtually complete removal of antisocial punishment when judges make the sanctioning decision.
    Keywords: cooperation, punishment ,endogenous institutions, public goods
    JEL: D02 D03 D72 H41
    Date: 2018
  11. By: Zhongxia (Shelly) Ye (Department of Accounting, UTSA)
    Abstract: In recent years a variety of stakeholders request more disclosures of audit committees’activities. As a response, audit committees in many large companies have voluntarily enhanced the depth and scope of their disclosures in the proxy statements. However, controversy arises surrounding whether more disclosures of audit committees’ activities are beneficial to investors. In 2015 the SEC started to seek comments on this issue. In this study I find that larger companies with diligent, longer-tenure, younger and more diversified audit committee members in companies with longer auditor tenure and higher total auditor fees are likely to provide more voluntary disclosures of audit committees’ activities. I also find that audit committee voluntary disclosures are useful to shareholders when they vote on audit committee director elections. However, the significance and directions of the usefulness vary with the content of the disclosures. Moreover, I provide moderate evidence that shareholders are less likely to vote against auditor ratification when the audit committee provides an explanation for a change in fees paid to the independent auditor. Overall, this study provides implications for policy makers such as the SEC as they are deliberating on the revisions of audit committee reporting requirements.
    Keywords: Audit committees, voluntary disclosures, director elections, audidtor ratification
    JEL: M42
    Date: 2018–01–18
  12. By: Bernard Dafflon (University of Fribourg, Switzerland)
    Abstract: In the aftermath of the 2008 financial crisis, both politicians and public finance economists focused their attention on ways to control public budget deficits and debt. Around the world, detailed and precise regulations affected how governments could deal with public deficit and debt. The “golden rule†of public finance states that governments should borrow only to invest and not to fund current spending, and that the current budget must always balance or show a surplus. Yet implementing the “golden rule†is not a simple question of setting limits to deficits and debt. Using the case of Switzerland, this paper presents the political and institutional economics of budget constraints and develops recommendations for budget management at the subnational government level. How do we balance the needs of current expenditures with intergenerational equity? Does fiscal control over deficit or debt require top-down policies from higher levels of government, or is self-imposed control reasonable?
    Keywords: budget management, budget rules, debt service, public deficit, sustainable indebtedness, public borrowing, subnational government debt
    JEL: H61 H62
    Date: 2018–05
  13. By: Mansbridge, Jane (Harvard University)
    Abstract: In recursive representation both representatives and constituents take in what the other is saying, update, revise, and respond on the basis of their own experience, then listen to the others’ response to their responses and respond to that accordingly. Recursive representation should replace or at least supplement the traditional norm of “two-way communication†as a component of the larger ideal of good political representation across the representative system. The ideal is aspirational (“regulative†) and may in many actual instances have prohibitive costs, but it can serve as a standard toward which to aspire. Currently the most active and affluent donors in democracies have access to recursive representation even at the national scale, as do some constituents at local levels. Even on the scale of a large nation-state, some currently available mechanisms make it feasible to approach this ideal more fully with average and even relatively marginal constituents. Recursive representation serves as an aspirational ideal in the arenas of administrative and societal representation as well as the arena of legislative/electoral representation.
    Date: 2017–09
  14. By: Luigi Guiso (EIEF and CEPR); Helios Herrera (Warwick University); Massimo Morelli (Bocconi University and CEPR); Tommaso Sonno (London School of Economics, Université Catholique de Louvain and F.R.S-FNRS)
    Abstract: Populist parties are likely to gain consensus when mainstream parties and status quo institutions fail to manage the shocks faced by their economies. Institutional constraints, which limit the possible actions in the face of shocks, result in poorer performance and frustration among voters who turn to populist movements. We rely on this logic to explain the different support of populist parties among European countries in response to the globalization shock and to the 2008-2011 financial and sovereign debt crisis. We predict a greater success of populist parties in response to these shocks in Euro zone countries, and our empirical analysis confirms this prediction. This is consistent with voters’ frustration for the greater inability of the Euro zone governments to react to difficult-to-manage globalization shocks and financial crises. Our evidence has implications for the speed of construction of political unions. A slow, staged process of political unification can expose the EU to a risk of political backlash if hard to manage shocks hit the economies during the integration process.
    Date: 2018

This nep-cdm issue is ©2018 by Stan C. Weeber. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.