nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2019‒09‒02
fifteen papers chosen by
Stan C. Weeber, McNeese State University

  1. An Experiment in Candidate Selection By Katherine Casey; Abou Bakarr Kamara; Niccoló Meriggi
  2. The Effect of Handicaps on Turnout for Large Electorates: An Application to Assessment Voting By Gersbach, Hans; Mamageishvili, Akaki; Tejada, Oriol
  3. "When Olson Meets Dahl": From Inefficient Groups Formation to Inefficient Policy-Making By Martimort, David
  4. Runoff Elections in the Laboratory By Bouton, Laurent; Gallego, Jorge; Llorente-Saguer, Aniol; Morton, Rebecca
  5. Winning Coalitions in Plurality Voting Democracies By Rene van den Brink; Dinko Dimitrov; Agnieszka Rusinowska
  6. Intertemporal Evidence on the Strategy of Populism By Gennaro, Gloria; Lecce, Giampaolo; Morelli, Massimo
  7. The Political Economy of the Prussian Three-class Franchise By Becker, Sascha O.; Hornung, Erik
  8. Empirical evidence on repeated sequential games By Ghidoni, Riccardo; Suetens, Sigrid
  9. The Three Meaningful Votes: Voting on Brexit in the British House of Commons By Aidt, T.; Grey, F.; Savu, A.
  10. Stress-Testing the Runoff Rule in the Laboratory By Nikolas Tsakas; Dimitrios Xefteris
  11. Outgroup Homogeneity Bias Causes Ingroup Favoritism By Marcel Montrey; Thomas R. Shultz
  12. A Structural Model for the Coevolution of Networks and Behavior By Hsieh, Chih-Sheng; König, Michael; Liu, Xiaodong
  13. Do Local Governments Represent Voter Preferences? Evidence from Hospital Financing under the Affordable Care Act By Victoria Perez; Justin M. Ross; Kosali I. Simon
  14. Farsighted manipulation and exploitation in networks By Bayer, Péter; Herings, P. Jean-Jacques; Peeters, Ronald
  15. Social preference and group identity in the financial cooperative By Christian Ewerhart; Robertas Zubrickas

  1. By: Katherine Casey; Abou Bakarr Kamara; Niccoló Meriggi
    Abstract: Are ordinary citizens or political party leaders better positioned to select candidates? While the direct vote primary system in the United States lets citizens choose, it is exceptional, as the vast majority of democracies rely instead on party officials to appoint or nominate candidates. Theoretically, the consequences of these distinct design choices on the selectivity of the overall electoral system are unclear: while party leaders may be better informed about candidate qualifications, they may value traits—like party loyalty or willingness to pay for the nomination—at odds with identifying the best performer. To make progress on this question, we partnered with both major political parties in Sierra Leone to experimentally vary how much say ordinary voters, as opposed to party officials, have in selecting Parliamentary candidates. We find evidence that more democratic selection procedures increase the likelihood that parties select the candidate most preferred by voters, favor candidates with stronger records of local public goods provision, and alter the allocation of payments from potential candidates to party officials.
    JEL: D72 H1 P16
    Date: 2019–08
  2. By: Gersbach, Hans; Mamageishvili, Akaki; Tejada, Oriol
    Abstract: We analyze the effect of handicaps on turnout. A handicap is a difference in the vote tally between alternatives that strategic voters take as predetermined when they decide whether to turn out for voting. Handicaps are implicit in many existing democratic procedures. Within a costly voting framework with private values, we show that turnout incentives diminish considerably across the board if handicaps are large, while low handicaps yield more mixed predictions. The results extend beyond the baseline model - e.g. by including uncertainty and behavioral motivations - and can be applied to the optimal design of Assessment Voting. This is a new voting procedure where (i) some randomly-selected citizens vote for one of two alternatives, and the results are published; (ii) the remaining citizens vote or abstain, and (iii) the final outcome is obtained by applying the majority rule to all votes combined. If the size of the first voting group is appropriate, large electorates will choose the majority's preferred alternative with high probability and average participation costs will be moderate or low.
    Keywords: Turnout - Referenda - Elections - Pivotal voting - Private value
    JEL: C72 D70 D72
    Date: 2019–08
  3. By: Martimort, David
    Abstract: Two conflicting interest groups buy favors from a policy-maker. Influence is modeled as a common agency game with lobbyists proposing monetary contributions contingent on decisions. When the preferences of the group members are common knowledge, groups form efficiently and lobbying competition perfectly aggregates preferences. When those preferences are instead private information, free riding in collective action arises within groups. Free riding implies that the influence of a group is weakened and that lobbying competition imperfectly aggregates preferences. By softening lobbying competition, private information might also increase groups' payoffs and hurt the policy-maker. Importantly, the magnitudes of informational frictions within each group are jointly determined at equilibrium. We draw from these findings a number of implications for the organization of interest groups.
    Date: 2019–07
  4. By: Bouton, Laurent; Gallego, Jorge; Llorente-Saguer, Aniol; Morton, Rebecca
    Abstract: We study experimentally the properties of the majority runoff system and compare them to the ones of plurality rule, in the setup of a divided majority. Our focus is on Duverger's famous predictions that the plurality rule leads to a higher coordination of votes on a limited number of candidates than the majority runoff rule. Our experiments show that, in contradiction with Duverger's predictions, coordination forces are strong in majority runoff elections. We indeed observe similar levels of coordination under both rules, even when sincere voting is an equilibrium only under majority runoff. Our results suggest that the apparent desire to coordinate, and not vote sincerely, under the majority runoff rule is to some extent not rational. Finally, we find insignificant differences between runoff and plurality systems in terms of both electoral outcomes and welfare. This is so exactly because coordination forces are strong under both rules. But, this does not mean that the two rules are equally socially desirable. Majority runoff rule entails an additional cost: second rounds that take place frequently.
    Keywords: Laboratory experiments; Majority Runoff; Multicandidate Elections; Plurality
    JEL: C92 D70
    Date: 2019–06
  5. By: Rene van den Brink (Vrije Universiteit Amsterdam); Dinko Dimitrov (Saarland University); Agnieszka Rusinowska (Paris School of Economics)
    Abstract: We study the issue of assigning weights to players that identify winning coalitions in plurality voting democracies. For this, we consider plurality games which are simple games in partition function form such that in every partition there is at least one winning coalition. Such a game is said to be precisely supportive if it is possible to assign weights to players in such a way that a coalition being winning in a partition implies that the combined weight of its members is maximal over all coalitions in the partition. A plurality game is decisive if in every partition there is exactly one winning coalition. We show that decisive plurality games with at most four players, majority games with an arbitrary number of players, and almost symmetric decisive plurality games with an arbitrary number of players are precisely supportive. Complete characterizations of a partition's winning coalitions are provided as well.
    Keywords: plurality game, plurality voting, precise support, simple game in partition function form, winning coalition
    JEL: C71 D62 D72
    Date: 2019–08–26
  6. By: Gennaro, Gloria; Lecce, Giampaolo; Morelli, Massimo
    Abstract: Do candidates use populism to maximize the impact of political campaigns? Is the supply of populism strategic? We apply automated text analysis to all available 2016 US Presidential campaign speeches and 2018 midterm campaign programs using a continuous index of populism. This novel dataset shows that the use of populist rhetoric is responsive to the level of expected demand for populism in the local audience. In particular, we provide evidence that current U.S. President Donald Trump uses more populist rhetoric in swing states and in locations where economic insecurity is prevalent. These findings were confirmed when the analysis was extended to recent legislative campaigns wherein candidates tended towards populism when campaigning in stiffly competitive districts where constituents are experiencing high levels of economic insecurity. We also show that pandering is more common for candidates who can credibly sustain anti-elite positions, such as those with shorter political careers. Finally, our results suggest that a populist strategy is rewarded by voters since higher levels of populism are associated with higher shares of the vote, precisely in competitive districts where voters are experiencing economic insecurity.
    Keywords: American Politics; Electoral Campaign; populism; Text Analysis
    JEL: D7
    Date: 2019–06
  7. By: Becker, Sascha O.; Hornung, Erik
    Abstract: Did the Prussian three-class franchise, which politically over-represented the economic elite, affect policy-making? Combining MP-level political orientation, derived from all roll call votes in the Prussian parliament (1867â??1903), with constituency characteristics, we analyze how local vote inequality, determined by tax payments, affected policy-making during Prussia's period of rapid industrialization. Contrary to the predominant view that the franchise system produced a conservative parliament, higher vote inequality is associated with more liberal voting, especially in regions with large-scale industry. We argue that industrialists preferred self-serving liberal policies and were able to coordinate on suitable MPs when vote inequality was high.
    Keywords: Elites; inequality; political economy; Prussia; Three-class Franchise
    JEL: D72 N43 N93 P26
    Date: 2019–08
  8. By: Ghidoni, Riccardo; Suetens, Sigrid
    Abstract: Sequentiality of moves in an infinitely repeated prisoner's dilemma does not change the conditions under which mutual cooperation can be supported in equilibrium as compared to simultaneous decision-making. The nature of the interaction is different, however, given that the second mover in a sequential-move game does not face strategic uncertainty. We study in an experiment whether sequentiality has an effect on cooperation rates. We find that with intermediate incentives to cooperate, sequentiality increases cooperation rates by around 40 percentage points, whereas with very low or high incentives to cooperate, cooperation rates are respectively very low or high in both settings.
    Keywords: Cooperation; Experiment; infinitely repeated game; sequential prisoner's dilemma; Strategic uncertainty
    JEL: C70 C90 D70
    Date: 2019–06
  9. By: Aidt, T.; Grey, F.; Savu, A.
    Abstract: Why do politicians rebel and vote against the party line when high stakes bills come to the floor of the legislature? We leverage the three so-called Meaningful Votes that took place in the British House of Commons between January and March 2019 on the Withdrawal Agreement that the Conservative government had reached with the European Union to address this question. The Withdrawal Agreement was decisively defeated three times and a major revolt amongst Conservative backbench Members of Parliament (MPs) was instrumental in this. We find that three factors influenced their rebellion calculus: the MP’s own preference, constituency preferences and career concerns. Somewhat paradoxically, the rebellion within the Conservative Party came from MPs who had supported Leave in the 2016 Brexit referendum and from MPs elected in Leave leaning constituencies.
    Keywords: BREXIT, roll call votes, rebellions, party discipline, party coherence, House of Commons
    JEL: D72
    Date: 2019–08–19
  10. By: Nikolas Tsakas; Dimitrios Xefteris
    Abstract: When a majority of voters has common values, but private information, then the runoff rule always admits an equilibrium that aggregates information strictly better than the best equilibrium of the plurality rule. But there are cases in which the plurality rule supports equilibria that are strictly better compared to certain undominated equilibria of the runoff rule. Is there any risk with applying the runoff rule in these situations? We conduct a laboratory experiment and we show that the runoff rule consistently delivers better outcomes than the plurality rule even in such unfavorable scenarios. This establishes that the superiority of the runoff rule over the plurality rule in empirical settings outperforms its theoretical advantages.
    Keywords: runoff voting; plurality rule; information aggregation; Condorcet jury theorem; experiment
    JEL: D72
    Date: 2019–08
  11. By: Marcel Montrey; Thomas R. Shultz
    Abstract: Ingroup favoritism, the tendency to favor ingroup over outgroup, is often explained as a product of intergroup conflict, or correlations between group tags and behavior. Such accounts assume that group membership is meaningful, whereas human data show that ingroup favoritism occurs even when it confers no advantage and groups are transparently arbitrary. Another possibility is that ingroup favoritism arises due to perceptual biases like outgroup homogeneity, the tendency for humans to have greater difficulty distinguishing outgroup members than ingroup ones. We present a prisoner's dilemma model, where individuals use Bayesian inference to learn how likely others are to cooperate, and then act rationally to maximize expected utility. We show that, when such individuals exhibit outgroup homogeneity bias, ingroup favoritism between arbitrary groups arises through direct reciprocity. However, this outcome may be mitigated by: (1) raising the benefits of cooperation, (2) increasing population diversity, and (3) imposing a more restrictive social structure.
    Date: 2019–08
  12. By: Hsieh, Chih-Sheng; König, Michael; Liu, Xiaodong
    Abstract: This paper introduces a structural model for the coevolution of networks and behavior. The microfoundation of our model is a network game where agents adjust actions and network links in a stochastic best-response dynamics with a utility function allowing for both strategic externalities and unobserved heterogeneity. We show the network game admits a potential function and the coevolution process converges to a unique stationary distribution characterized by a Gibbs measure. To bypass the evaluation of the intractable normalizing constant in the Gibbs measure, we adopt the Double Metropolis-Hastings algorithm to sample from the posterior distribution of the structural parameters. To illustrate the empirical relevance of our structural model, we apply it to study R&D investment and collaboration decisions in the chemicals and pharmaceutical industry and find a positive knowledge spillover effect. Finally, our structural model provides a tractable framework for a long-run key player analysis.
    Keywords: Double Metropolis-Hastings algorithm; Key players; network interactions; R&D collaboration networks; stochastic best-response dynamics; strategic network formation; Unobserved heterogeneity
    JEL: C11 C31 C63 C73 L22
    Date: 2019–08
  13. By: Victoria Perez; Justin M. Ross; Kosali I. Simon
    Abstract: A mainstream motivation for decentralized government is to enable public service investments to better align with political preferences that may differ by geographical region. This paper examines how political preferences determine local government provision of hospital services. We find that local governments in areas more supportive of public insurance expansion responded to such state action by increasing expenditures on hospitals, whereas those in areas that voted against such expansions used the savings to reduce property taxes. This finding suggests that local government financial responses indeed align with political preferences.
    JEL: H71 H72 I1 I11
    Date: 2019–07
  14. By: Bayer, Péter (university of grenoble alpes); Herings, P. Jean-Jacques (General Economics 1 (Micro)); Peeters, Ronald (university of otago, dunedin)
    Abstract: Economic agents with an increased sophistication sometimes use their advantage to exploit their more naive counterparts. In public goods games played on networks, such an agent will attempt to manipulate as many of his neighbors as possible to produce the public good. We study the exploitation of a myopic population by a single farsighted player in such games. We show the existence and payoff-uniqueness of optimal farsighted strategies in every network structure. In the long run, the farsighted player’s effects are only felt locally. A simple dependence-withdrawal strategy reaches the optimal outcome for every network if the starting state is unfavorable, and reaches it for every starting state if the farsighted player is linked to all opponents. We characterize the lower and upper bounds of long-run payoffs the farsighted player can attain in a given network and make comparative statics with respect to adding a new link. The farsighted player always benefits from linking to more opponents (sociability) and is always harmed by his neighbors linking to each other (jealousy).
    Keywords: networks, public goods, myopic and farsighted players
    JEL: C73 D85 H41
    Date: 2019–08–29
  15. By: Christian Ewerhart; Robertas Zubrickas
    Abstract: We model the financial cooperative as an optimal institution sharing liquidity risks among agents with social preference and group identity. Stronger social concerns imply objectively better (worse) conditions for borrowers (depositors). Testing the model, we find that, indeed, deposit and loan rates offered by U.S. credit unions between 1995 and 2014 co-moved with (i) the number of members, and (ii) the common bond. Our theory explains how cooperatives coexist with banks, and why they have tended to be more resilient. However, the analysis also suggests that financial inclusion and advantages in resilience might quickly evaporate as membership requirements get diluted.
    Keywords: Social preferences, group identity, liquidity insurance, cooperative banking, credit union, common bond, bank competition, resilience
    JEL: G21 D91 L31 G28
    Date: 2019–08

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