nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2019‒06‒17
sixteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Brothers or Invaders? How Crises-Driven Migrants Shape Voting Behavior By Sandra Rozo; Juan Vargas
  2. Information Aggregation with Runoff Voting By Nikolas Tsakas; Dimitrios Xefteris
  3. Collective intertemporal decisions and heterogeneity in groups By Daniela Glaetzle-Ruetzler; Philipp Lergetporer; Matthias Sutter
  4. Spillover effects across transnational industrial relations agreements: the potential and limits of collective action in global supply chains By Ashwin, Sarah; Oka, Chikako; Schüßler, Elke; Alexander, Rachel; Lohmeyer, Nora
  5. What Happens When Voting Rules Change?The Case of New Zealand By J. Stephen Ferris
  6. A network approach to cartel detection in public auction markets By Johannes Wachs; J\'anos Kert\'esz
  7. Tariff Bindings and the Dynamic Formation of Preferential Trade Agreements By James Lake; Moise Nken; Halis M. Yildiz
  8. Using Local Public Goods to Attract and Retain the Creative Class: A Tale of Two Cities By Batabyal, Amitrajeet; Kourtit, Karima; Nijkamp, Peter
  9. Learning to cooperate in the shadow of the law By Roberto Galbiati; Emeric Henry; Nicolas Jacquemet
  10. Ethnic Identities, Public Spending and Political Regimes By Sugata Ghosh; Anirban Mitra
  11. Coming Out in America: AIDS, Politics, and Cultural Change By Fernández, Raquel; Parsa, Sahar; Viarengo, Martina
  12. Second thoughts of social dilemma in mechanism design By Tatsuyoshi Saijo
  13. Conventions and Coalitions in Repeated Games By S. Nageeb Ali; Ce Liu
  14. A Theory of Clientelistic Politics versus Programmatic Politics By Pranab Bardhan; Dilip Mookherjee
  15. Competing Mechanisms and Folk Theorems: Two Examples By Andrea Attar; Eloisa Campioni; Thomas Mariotti; Gwenael Piaser
  16. Over indebted Subnational Mexico: Does political polarization affect debt policy decisions? By Heidi Jane Smith; Isabel Melguizo

  1. By: Sandra Rozo (University of Southern California); Juan Vargas (Universidad del Rosario)
    Abstract: Can voter’s negative attitudes toward immigration be explained by self-interest or sociotropic motives? Self-interested voters care about their personal economic circumstances. Sociotropic voters display in-group bias and perceive migrants as threats to their culture. We study the voting effects of forced internal and international migration in Colombia and exploit the disproportionate flows of migrants to municipalities with early settlements of individuals from their origin locations. In line with the sociotropic hypothesis, we find that only international migration inflows increase political participation and shift votes from left- to right-wing ideologies. These results are not accounted for by the observed changes caused by migrants in socioeconomic variables.
    Keywords: Colombia; Economic Development, Political Development, Demographic; Socioeconomic
    JEL: D72 F2 O15 R23
    Date: 2019–06
  2. By: Nikolas Tsakas; Dimitrios Xefteris
    Abstract: A majority of independent voters wants to choose the alternative that better matches the state of the world, but may disagree on its identity due to private information. When we have an arbitrary number of alternatives and also sophisticated partisan voters exist in the electorate, the election of the correct alternative is a real challenge. Building upon McLennan (1998) and Barelli et al. (2017) we show that runoff voting -one of the most intuitive electoral systems- achieves asymptotically full information equivalence. That is, when the society is large, it can lead to the election of the correct alternative under fairly general assumptions regarding the information structure and partisans' preferences.
    Keywords: runoff voting; information aggregation; partisan voters; Condorcet jury theorem
    JEL: D71 D72
    Date: 2019–05
  3. By: Daniela Glaetzle-Ruetzler; Philipp Lergetporer; Matthias Sutter
    Abstract: Many important intertemporal decisions, such as investments of firms or households, are made by groups rather than individuals. Little is known what happens to such collective deci- sions when group members have different incentives for waiting, because the economics liter- ature on group decision making has, so far, assumed homogeneity within groups. In a lab ex- periment, we study the causal effect of group members’ heterogeneous payoffs from waiting on intertemporal choices. We find that three-person groups behave more patiently than indi- viduals and that this effect is driven by the presence of at least one group member with a high payoff from waiting. We present group chat content, survey data, and additional treatments to uncover the mechanism through which heterogeneity in groups increases patience.
    Keywords: patience, time preferences, group decisions, payoff heterogeneity, experiment
    JEL: C91 C92 D03 D90
    Date: 2019–10
  4. By: Ashwin, Sarah; Oka, Chikako; Schüßler, Elke; Alexander, Rachel; Lohmeyer, Nora
    Abstract: Using qualitative data comprising interviews with multiple respondents in 45 garment brands and retailers, and unions and other stakeholders, the authors analyze the emergence of the Action Collaboration Transformation (ACT) living wages initiative, asking how the interfirm coordination and firm-union cooperation demanded by a multifirm transnational industrial relations agreement (TIRA) developed. Synthesizing insights from the industrial relations and private governance literatures along with recent collective action theory, they identify a new pathway for the emergence of multi-firm TIRAs based on common group understandings, positive experiences of interaction and trust. The central finding is that existing union-inclusive governance initiatives provided a platform from which spillover effects developed, facilitating the formation of new TIRAs. The authors contribute a new mapping of labor governance approaches on the dimensions of inter-firm coordination and labor inclusiveness, foregrounding socialization dynamics as a basis for collective action, and problematizing the limited scalability of this mode of institutional emergence.
    JEL: R14 J01
    Date: 2019
  5. By: J. Stephen Ferris (Department of Economics, Carleton University)
    Abstract: This paper examines the impact of New Zealand’s 1996 adoption of a mixed member proportional (MMP) voting scheme on representation in the legislature, voter turnout, vote volatility and the likelihood of an incumbent party winning re-election. I then consider whether MMP has had any negative consequences for the effectiveness of government policy in relation to fiscal accountability and countercyclical intervention. The data used in the analysis begins from the formation of the party system in New Zealand (in 1890) and extends through the adoption of MMP to the present (2017). The data set covers 42 elections: 34 before 1996 and 8 after.
    Keywords: Institutional change, Mixed Member Proportional Voting, Vote turnout, Vote volatilities, Winning margins, New Zealand
    JEL: D72 C41 C24
    Date: 2019–06–05
  6. By: Johannes Wachs; J\'anos Kert\'esz
    Abstract: Competing firms can increase profits by setting prices collectively, imposing significant costs on consumers. Such groups of firms are known as cartels and because this behavior is illegal, their operations are secretive and difficult to detect. Cartels feel a significant internal obstacle: members feel short-run incentives to cheat. Here we present a network-based framework to detect potential cartels in bidding markets based on the idea that the chance a group of firms can overcome this obstacle and sustain cooperation depends on the patterns of its interactions. We create a network of firms based on their co-bidding behavior, detect interacting groups, and measure their cohesion and exclusivity, two group-level features of their collective behavior. Applied to a market for school milk, our method detects a known cartel and calculates that it has high cohesion and exclusivity. In a comprehensive set of nearly 150,000 public contracts awarded by the Republic of Georgia from 2011 to 2016, detected groups with high cohesion and exclusivity are significantly more likely to display traditional markers of cartel behavior. We replicate this relationship between group topology and the emergence of cooperation in a simulation model. Our method presents a scalable, unsupervised method to find groups of firms in bidding markets ideally positioned to form lasting cartels.
    Date: 2019–06
  7. By: James Lake (Southern Methodist University); Moise Nken (Ryerson University); Halis M. Yildiz (Ryerson University)
    Abstract: We show that multilateral tariff binding liberalization substantially impacts the nature and extent of Preferential Trade Agreement (PTA) formation. First, it shapes the nature of forces constraining expansion of Free Trade Agreements (FTAs). The constraining force is a free riding incentive of FTA non-members under relatively high bindings but an exclusion incentive of FTA members under relatively low bindings. Second, multilateral tariff binding liberalization shapes the role played by PTAs in the attainment of global free trade. Initially, tariff binding liberalization leads to Custom Union (CU) formation in equilibrium but in a way that undermines the pursuit of global free trade. However, further tariff binding liberalization leads to FTA formation in equilibrium and in a way that facilitates the attainment of global free trade. Our theoretical analysis also has implications regarding recent empirical discussions over the relative merits of FTAs versus CUs.
    Keywords: Tariff bindings, Preferential Trade Agreement, Free Trade Agreement, Customs Union, global free trade, dynamic
    JEL: C72 F12 F13
    Date: 2019–06
  8. By: Batabyal, Amitrajeet; Kourtit, Karima; Nijkamp, Peter
    Abstract: We study the impact that the provision of a local public good (LPG) by two cities has on their ability to attract and retain members of the creative class. This creative class consists of two types of members known as engineers and artists. Engineers are wealthier than artists and they also value the LPG more. We first focus on each city in isolation. We compute the marginal value and the marginal cost of the LPG and then determine the provision of this LPG when the provision is determined by uniform contributions and majority voting. Next, we allow the creative class members to migrate between the two cities and analyze whether engineers or artists migrate, the equilibrium distribution of the creative class, and the efficiency of the LPG provision. Finally, we consider the situation in each city just before migration and study how much of the LPG is provided when proportional contributions and majority voting determine this provision. A related question we address is whether engineers or artists now have an incentive to migrate and, if yes, we identify who would like to migrate and to which city.
    Keywords: Artist, Creative Class, Engineer, Local Public Good, Majority Voting
    JEL: H40 R11
    Date: 2019–03–07
  9. By: Roberto Galbiati (OSC - Observatoire sociologique du changement - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Emeric Henry (ECON - Département d'économie - Sciences Po); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: How does the exposure to past institutions affect current cooperation? While a growing literature focuses on behavioral channels, we show how cooperation-enforcing institutions affect rational learning about the group's value. Strong institutions, by inducing members to cooperate , may hinder learning about intrinsic values in the group. We show, using a lab experiment with independent interactions and random rematching, that participants behave in accordance with a learning model, and in particular react differently to actions of past partners whether they were played in an environment with coercive enforcement or not.
    Keywords: Enforcement,social values,cooperation,learning,spillovers,persistence of insti- tutions,repeated games,experiments
    Date: 2019–06–03
  10. By: Sugata Ghosh; Anirban Mitra
    Abstract: Do democracies discriminate less against minorities as compared to non-democracies? How does the dominance of an ethnic group affect discrimination under various political regimes? We build a theory which tries to answer such questions. In our model, political leaders (democratically elected or not) decide on the allocation of spending on different types of public goods: a general public good and an ethnically-targetable public good which benefits the majority ethnic group while imposing a cost on the other minorities. We show that, under democracy, lower ethnic dominance leads to greater provision of the general public good while higher dominance implies higher provision of the ethnically-targetable good. Interestingly, the opposite relation obtains under dictatorship. This implies that political regime changes can favour or disfavour minorities based on the ambient level of ethnic dominance. Several historical events involving regime changes can be analysed within our framework and are consistent with our results.
    Keywords: Ethnic identities; Discrimination; Public spending; Political regimes
    JEL: D72 D74 H40
    Date: 2019–06
  11. By: Fernández, Raquel; Parsa, Sahar; Viarengo, Martina
    Abstract: The last few decades witnessed a dramatic change in public opinion towards gay people. This paper studies the hypothesis that the AIDS epidemic was a shock that changed the incentive to "come out" and that the ensuing process of mobilization and endogenous political process led to cultural transformation. We show that the process of change was discontinuous over time and present suggestive evidence that the 1992 presidential election followed by the "don't ask, don't tell" debate led to a change in attitudes. Using a difference-in-difference empirical strategy, we find that, in accordance with our hypothesis, the change in opinion was greater in states with higher AIDS rates. Our analysis suggests that if individuals in low-AIDS states had experienced the same average AIDS rate as a high-AIDS state, the change in their approval rate from the '70s to the '90s would have been 50 percent greater.
    Keywords: AIDS epidemic; Cultural change; LGBT attitudes; Party politics; presidential elections; Public Opinion
    JEL: J15 P16 Z13
    Date: 2019–05
  12. By: Tatsuyoshi Saijo (School of Economics and Management, Kochi University of Technology)
    Abstract: This paper shows that second thoughts are not an innocent device in our daily life, but is human wisdom that plays an important role in resolving problems such as social dilemmas. We design a simple mechanism to achieve Pareto efficiency in social dilemmas, and then compare the performance of this mechanism with and without second thoughts. First, second thoughts change the payoff structure of the game in favor of cooperation. Second, this mechanism is robust even when players deviate from a payoff maximizing behavior.
    Keywords: second thoughts, subgame perfection, social dilemma, cooperation, mechanism design
    JEL: C72 C92 D74
    Date: 2019–06
  13. By: S. Nageeb Ali; Ce Liu
    Abstract: We develop a theory of repeated interaction for coalitional behavior. We consider stage games where both individuals and coalitions may deviate. However, coalition members cannot commit to long-run behavior (on and off the path), and anticipate that today's actions influence tomorrow's behavior. We evaluate the degree to which history-dependence can ward off coalitional deviations. If monitoring is perfect, every feasible and strictly individually rational payoff can be supported by history-dependent conventions. By contrast, if players can make secret side-payments to each other, every coalition achieves a coalitional minmax value, reducing the set of supportable payoffs to the core of the stage game.
    Date: 2019–06
  14. By: Pranab Bardhan (University of California Berkeley); Dilip Mookherjee (Boston University)
    Abstract: We provide a theoretical analysis of the distinction between clientelistic and programmatic politics and resulting consequences for policy choices and political competition. Clientelism arises when elected officials exercise ex post discretion over delivery of government transfers to citizens in an informal sector, and condition this on political support. Two party Downsian competition features ‘programmatic’ equilibria involving policy convergence and close elections if parties are equally popular ex ante. If the informal sector is large enough, these equilibria are locally unstable, and multiple asymmetric ‘clientelistic’ locally stable equilibria arise. Clientelistic equilibria involve policy divergence, lower supply of public goods, and higher inequality in vote shares. Comparative statics and welfare properties of the two classes of equilibria are related to existing empirical evidence.
    Date: 2018–08
  15. By: Andrea Attar (CEIS & DEF University of Rome "Tor Vergata"); Eloisa Campioni (CEIS & DEF University of Rome "Tor Vergata"); Thomas Mariotti (Toulouse School of Economics, CNRS); Gwenael Piaser (IPAG Business School, Paris)
    Abstract: We study competing-mechanism games under exclusive competition: principals first simultaneously post mechanisms, then agents simultaneously choose to participate and communicate with at most one principal. In this setting, which is common to competing-auction and competitive-search applications, we develop two examples that question the relevance of the folk theorems for competing-mechanism games documented in the literature. The first example shows that there can exist pure-strategy equilibria in which some principal obtains a payoff below her min-max payoff, computed over all principals' decisions. Thus folk-theorem results may have to involve a bound on principals' payoffs that depends on the spaces of messages available to the agents, and not only on the players' available actions. The second example shows that even this nonintrinsic approach is misleading when agents' participation decisions are strategic: there can exist incentive-feasible allocations in which principals obtain payoffs above their min-max payoffs, computed over arbitrary spaces of mechanisms, but which cannot be supported in equilibrium.
    Keywords: Competing Mechanisms, Folk Theorems, Exclusive Competition
    JEL: D82
    Date: 2019–06–06
  16. By: Heidi Jane Smith (Economics Department, Universidad Iberoamericana); Isabel Melguizo (Economics Department, Centro de Investigación y Docencia Económicas (CIDE))
    Abstract: Does polarization promote overspending and increase local deficits? Alesina and Tabellini (1990) suggests that more conflict between political parties encourages the opposition to over spend causing inefficient levels of public debt. According to cross national OECD data analyst find that high-level of political conflict result in surging fiscal deficits. The larger the ideological difference, the higher the likelihood of not being reelected. Thus, the incumbent will have higher incentive to spend in order to meet campaign promises. These promises often exceed current expenditures and therefore lead to public officials to access the debt market, ultimately raising the total amount of debt spending. Empirical studies to evaluate this inefficiency are typically done at the state level or cross national, but few have evaluated sub-sovereign debt issuance (Alt and Lassen 2006; Alesina1989; Alt 1985; Drazen and Eslava 2010). This research evaluates Alesina and Tabellini?s polarization theory within the newly democratizing Mexico. By using data from 2000-2014, the study first uses Dalton (2008) measure of polarization, based on voter perceptions of party positions in the Comparative Study of Electoral Systems (CSES), and secondly as the margin of victory in a panel data set with public finance indicators (percentage of total expenditures gathered by Mexico?s National Geography and Statistics Institute (INEGI) and type of debt issuance presented by Mexico?s National Treasury office (Secretaria de Hacienda y Credito Publico ?SHCP). Next the study evaluates not only when in the electoral political cycles (Hibbs 1977, 1987 and Cox and McCubbins 2001) influence deficit spending, but also which type of debt does (public bond bank, commercial banks, trusts funds of the bond market increases that debt). The tentative results show that municipal debt increases in non-electoral years, i.e. the year before and after the next election, which is congruent with other research on Mexico (Benton and Smith 2017); but also that debt issuance increases for commercial bank loans and the public bond bank in those years, suggesting the easier the accessibility of the type of debt will have more probability to be effected by these ideologically difference in the electoral cycle.
    Date: 2019–06–05

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