nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2021‒06‒28
fifteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Vox Populi, Vox Dei? Tacit Collusion in Politics By Johansson, Christian; Kärnä, Anders; Meriläinen, Jaakko
  2. Deliberative forms of democracy and intergenerational sustainability dilemma By Pankaj Koirala; Raja Rajendra Timilsina; Koji Kotani
  3. Institutions, opportunism and prosocial behavior: Some experimental evidence By Cabrales, Antonio; Clots-Figueras, Irma; Hernán-González, Roberto; Kujal, Praveen
  4. Investment Committee Voting and the Financing of Innovation By Andrey Malenko; Ramana Nanda; Matthew Rhodes-Kropf; Savitar Sundaresan
  5. Voting by Simultaneous Vetoes By Margarita Kirneva; Matias Nunez
  6. The Virus of Fear: The Political Impact of Ebola in the U.S. By Filipe Campante; Emilio Depetris-Chauvin; Ruben Durante
  7. The Effect of Social Media on Elections: Evidence from the United States By Thomas Fujiwara; Karsten Müller; Carlo Schwarz
  8. A Political-Economy Perspective on Mayoral Elections and Urban Crime By Batabyal, Amitrajeet; Beladi, Hamid
  9. Voting right rotation, behavior of committee members and financial market reactions: evidence from the U.S. Federal Open Market Committee By Ehrmann, Michael; Tietz, Robin; Visser, Bauke
  10. Ostracism and Theft in Heterogeneous Groups By Alexandra Baier; Loukas Balafoutas; Tarek Jaber-Lopez
  11. Politicians' Willingness to Agree: Evidence from the interactions in Twitter of Chilean Deputies By Pablo Henr\'iquez; Jorge Sabat; Jos\'e Patr\`icio Sullivan
  12. Group-identity and long-run cooperation: an experiment By Gabriele Camera; Lukas Hohl
  13. Long-Term Decline of Regions and the Rise of Populism: The Case of Germany By Maria Greve; Michael Fritsch; Michael Wyrwich
  14. The Seeds of Ideology: Historical Immigration and Political Preferences in the United States By Giuliano, Paola; Tabellini, Marco
  15. The Bargaining Set and Coalition Formation By Ken-Ichi Shimomura

  1. By: Johansson, Christian (Chalmers University of Technology); Kärnä, Anders (Research Institute of Industrial Economics (IFN)); Meriläinen, Jaakko (ITAM)
    Abstract: We study competition between political parties in repeated elections with probabilistic voting, allowing a multidimensional policy space and multiple political parties. This model entails multiple equilibria. When parties hold different opinions on some policy, they may take different policy positions that do not coincide with the median voter’s preferred policy platform but converge towards it. In contrast, when parties have a mutual understanding on a particular policy, their policy positions may converge (on some dimension) but not to the median voter’s preferred policy. Parties may collude with one another and take a position that differs from what the median voter prefers, despite political competition. Collusion may collapse, for instance, after the entry of a new political party. We substantiate the theoretical arguments with descriptive evidence using Swedish survey data on politicians and voters, which suggests that there is competition on some dimensions and collusion on others.
    Keywords: Electoral competition; Partisan collusion; Probabilistic voting; Repeated elections; Tacit collusion
    JEL: C73 D72 P16
    Date: 2021–06–16
  2. By: Pankaj Koirala (School of Economics and Management, Kochi University of Technology); Raja Rajendra Timilsina (School of Economics and Management, Kochi University of Technology); Koji Kotani (School of Economics and Management, Kochi University of Technology)
    Abstract: Intergenerational sustainability (IS) has emerged as the most serious social problem reflecting climate change and accumulation of public debt in modern democratic societies, undermining the potential interests and concerns of future generations. However, little is known about whether or not deliberative forms of democracy with majority voting helps support at maintaining IS by representing future generations’ potential interests and concerns. We institute intergenerational sustainability dilemma game (ISDG) with three forms of decision-making models with majority voting and examine how they maintain IS in laboratory experiments. In ISDG, a sequence of six generations is prepared where each generation consisting of three subjects is asked to choose either maintaining IS (sustainable option) or maximizing their own generation’s payoff by irreversibly costing the subsequent generations (unsustainable option) with anonymous voting systems: (1) majority voting (MV), (2) deliberative majority voting (DMV) and (3) majority voting with deliberative accountability (MVDA). In MV and DMV, generations vote for their choices without and with deliberation, respectively. In MVDA, generations are asked to be possibly accountable for their choices to the subsequent generations during deliberation, and then vote. Our analysis shows that decision-making models with only majority voting generally does not address IS, while DMV and MVDA treatments induce more and much more generations to choose a sustainable option than MV, respectively. Overall, the results demonstrate that deliberation and accountability along with majority voting shall be necessary in models of decision making at resolving IS problems and representing future generations’ potential interests and concerns.
    Keywords: democracy, decision-making, majority voting, deliberation, intergenerational accountability
    Date: 2021–06
  3. By: Cabrales, Antonio; Clots-Figueras, Irma; Hernán-González, Roberto; Kujal, Praveen
    Abstract: Formal or informal institutions have long been adopted by societies to protect against opportunistic behavior. However, we know very little about how these institutions are chosen and their impact on behavior. We experimentally investigate the demand for different levels of institutions that provide low to high levels of insurance and its subsequent impact on prosocial behavior. We conduct a large-scale online experiment where we add the possibility of purchasing insurance to safeguard against low reciprocity to the standard trust game. We compare two different mechanisms, the private (purchase) and the social (voting) choice of institutions. Whether voted or purchased, we find that there is demand for institutions in low trustworthiness groups, while high trustworthiness groups always demand lower levels of institutions. Lower levels of institutions are demanded when those who can benefit from opportunistic behavior, i.e. low trustworthiness individuals, can also vote for them. Importantly, the presence of insurance crowds out civic spirit even when subjects can choose the no insurance option: trustworthiness when formal institutions are available is lower than in their absence.
    Keywords: institutions; Insurance; Trust; trustworthiness; voting
    JEL: C92 D02 D64
    Date: 2020–05
  4. By: Andrey Malenko (University of Michigan); Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit); Matthew Rhodes-Kropf (Massachusetts Institute of Technology); Savitar Sundaresan (Imperial College London)
    Abstract: We provide novel evidence on voting practices used by the investment committees of prominent venture capital investors in the U.S. A substantial share of these VCs use a voting rule for seed and early stage investments where a single `champion' is sufficient for the entire partnership to make an investment, even if other members are not as favorable. However, the same VCs migrate to more conventional `majority' or `unanimous' voting rules for their later stage investments. We show theoretically that a `champions' model can emerge as the optimal voting rule when outcomes follow a sub-exponential distribution (resembling the investments of early stage VC), but also requires that partners have sufficiently common objectives to prevent strategic overchampioning for pet projects. More traditional voting rules are robust to overchampioning but are more likely to systematically miss the best early stage investments.
    Date: 2021–06
  5. By: Margarita Kirneva (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, IP Paris - Institut Polytechnique de Paris, GENES - Groupe des Ecoles Nationales d'Economie et Statistique - Institut national de la statistique et des études économiques (INSEE)); Matias Nunez (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], IP Paris - Institut Polytechnique de Paris, GENES - Groupe des Ecoles Nationales d'Economie et Statistique - Institut national de la statistique et des études économiques (INSEE))
    Abstract: We propose the first class of simultaneous voting mechanisms in which each Nash equilibrium is coalition-proof. These mechanisms hence prevent the coordination failures which arise when some (coalition of) voters could have induced an outcome that they all prefer to the equilibrium outcome had they agreed on a common strategy. In each of these mechanisms, some voter(s) has the right to veto a list of alternatives. For each specification of the veto rights, each of these mechanisms implements a Veto by random priority rule introduced by Moulin [1981]. We then discuss necessary conditions for arbitrary mechanisms to implement a Pareto efficient rule ensuring that each equilibrium is coalition-proof. We show that the presence of veto rights in the mechanism is unavoidable to achieve this demanding implementation notion.
    Keywords: Implementation,Voting,Vetoes,Coalition Formation,Efficiency
    Date: 2021–05–28
  6. By: Filipe Campante; Emilio Depetris-Chauvin; Ruben Durante
    Abstract: We study how fear can affect the behavior of voters and politicians by looking at the Ebola scare that hit the U.S. a month before the 2014 midterm elections. Exploiting the timing and location of the four cases diagnosed in the U.S., we show that heightened concern about Ebola, as measured by online activity, led to a lower vote share for the Democrats in congressional and gubernatorial elections, as well as lower turnout, despite no evidence of a general anti-incumbent effect (including on President Obama’s approval ratings). We then show that politicians responded to the Ebola scare by mentioning the disease in connection with immigration, terrorism, and President Obama in newsletters, tweets and campaign ads. This response came only from Republicans, especially those facing competitive races, suggesting a strategic use of the issue in conjunction with topics perceived as favorable to them. Survey evidence suggests that voters responded with increasingly conservative attitudes on immigration but not on other ideologically-charged issues. Taken together, our findings indicate that emotional reactions associated with fear can have a strong electoral impact, that politicians perceive and act strategically in response to this, and that the process is mediated by issues that can be plausibly associated with the specific fear-triggering factor.
    Date: 2020
  7. By: Thomas Fujiwara; Karsten Müller; Carlo Schwarz
    Abstract: We study how social media affects election outcomes in the United States. We use variation in the number of Twitter users across counties induced by early adopters at the 2007 South by Southwest (SXSW) festival, a key event in Twitter's rise to popularity. We show that this variation is unrelated to observable county characteristics and electoral outcomes before the launch of Twitter. Our results indicate that Twitter lowered the Republican vote share in the 2016 and 2020 presidential elections, but had limited effects on Congress elections and previous presidential elections. Evidence from survey data, primary elections, and a text analysis of millions of tweets suggests that Twitter's relatively liberal content may have persuaded voters with moderate views to vote against Donald Trump.
    JEL: D72
    Date: 2021–05
  8. By: Batabyal, Amitrajeet; Beladi, Hamid
    Abstract: We provide a political-economy analysis of crime prevention in an arbitrary city in the United States. City residents (voters) elect mayors (politicians) and elected mayors determine the resources to be allocated to crime prevention. Between the two time periods, there is an election. Politicians are either honest or dishonest. The marginal cost of public monies ψ measures how efficiently an elected mayor converts tax receipts into crime prevention. Voters have identical per period utility functions. We ascertain the equilibrium outcome and per period voter well-being. Second, we show that an increase in ψ reduces the equilibrium allocation of resources to crime prevention and voter well-being. Third, a dishonest politician can delay the revelation of his dishonesty. A critical value of ψ,ψ^*, exists such that a dishonest incumbent separates and loses the election if and only if ψ>ψ^* and he pools and is re-elected otherwise. Finally, we note that an increase in ψ can raise voter well-being when politicians are more likely to be dishonest.
    Keywords: City Resident, Crime Prevention, Election, Mayor, Voting
    JEL: D72 R11 R50
    Date: 2020–12–15
  9. By: Ehrmann, Michael; Tietz, Robin; Visser, Bauke
    Abstract: Whether Federal Reserve Bank presidents have the right to vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: also nonvoting presidents attend and participate in the meetings of the committee. Does voting status change behavior? We find that the data go against the hypothesis that without the voting right, presidents use their public speeches and their meeting interventions to compensate for the loss of formal influence; rather, they support the hypothesis that the voting right makes presidents more involved. We also find that speeches move financial markets less in years that presidents vote. We argue that these discounts are consistent with their communication behavior. JEL Classification: D71, D72, E58
    Keywords: central bank communication, financial market response, FOMC, monetary policy committee, voting right rotation
    Date: 2021–06
  10. By: Alexandra Baier; Loukas Balafoutas; Tarek Jaber-Lopez
    Abstract: Ostracism, or exclusion by peers, has been practiced since ancient times as a severe form of punishment against transgressors of laws or social norms. The purpose of this paper is to offer a comprehensive analysis on how ostracism affects behavior and the functioning of a social group. We present data from a laboratory experiment, in which participants face a social dilemma on how to allocate limited resources between a productive activity and theft, and are given the opportunity to exclude members of their group by means of majority voting. Our main treatment features an environment with heterogeneity in productivity within groups, thus creating inequalities in economic opportunities and income. We find that exclusion is an effective form of punishment and decreases theft by excluded members once they are re-admitted into the group. However, it also leads to some retaliation by low-productivity members. A particularly worrisome aspect of exclusion is that punished group members are stigmatized and have a higher probability of facing exclusion again. We discuss implications of our findings for penal systems and their capacity to rehabilitate prisoners.
    Keywords: ostracism, social dilemma, theft, rehabilitation, heterogeneous groups
    JEL: C91 C92 K42
    Date: 2021
  11. By: Pablo Henr\'iquez; Jorge Sabat; Jos\'e Patr\`icio Sullivan
    Abstract: Measuring the number of "likes" in Twitter and the number of bills voted in favor by the members of the Chilean Chambers of Deputies. We empirically study how signals of agreement in Twitter translates into cross-cutting voting during a high political polarization period of time. Our empirical analysis is guided by a spatial voting model that can help us to understand Twitter as a market of signals. Our model, which is standard for the public choice literature, introduces authenticity, an intrinsic factor that distort politicians' willigness to agree (Trilling, 2009). As our main contribution, we document empirical evidence that "likes" between opponents are positively related to the number of bills voted by the same pair of politicians in Congress, even when we control by politicians' time-invariant characteristics, coalition affiliation and following links in Twitter. Our results shed light into several contingent topics, such as polarization and disagreement within the public sphere.
    Date: 2021–06
  12. By: Gabriele Camera (Economic Science Institute, Chapman University and DSE, University of Bologna); Lukas Hohl (University of Basel)
    Abstract: We stress-test the limits of the power of group identity in the context of cooperation by constructing laboratory economies where participants confront an indefinitely repeated social dilemma as strangers. Group identity is artificially induced by ran-dom assignment to color-coded groups, and reinforced by an initial cooperation task played in-group and in fixed pairs. Subsequently subjects interact in-group and out-group in large economies, as strangers. Indefinite repetition guarantees full cooperation is an equilibrium. Decision-makers can discriminate based on group aÿliation, but cannot observe past behaviors. We find no evidence of group biases. This suggests that group e ects are less likely to emerge when players cannot easily observe and compare characteristics on which to base categorizations and behaviors.
    Keywords: large groups, indefinitely repeated game, social norms
    JEL: C70 C90 D03
    Date: 2021
  13. By: Maria Greve (Friedrich Schiller University Jena, Germany and University of Groningen, The Netherlands); Michael Fritsch (Friedrich Schiller University Jena, Germany); Michael Wyrwich (University of Groningen, The Netherlands and Friedrich Schiller University Jena, Germany)
    Abstract: What characterizes regions where right-wing populist parties are relatively successful? A prominent hypothesis proposed in recent literature claims that places that are "left behind" or "do not matter" are a breeding ground for the rise of populism. We re-examine this hypothesis by analyzing the rise of populism in Germany. Our results suggest that the high vote shares of populist parties are not only associated with low regional levels of welfare as such, but also with the long-term decline of a region's relative welfare. Hence, it is not the regions that do "not matter" that are most prone to the rise of populism, but the regions that once mattered, but are in long-term decline. Moreover, we find that regional knowledge represents an important channel through which the historical decline in wealth explains voting behavior in German regions.
    Keywords: Populism, economic development, territorial inequality, economic history
    JEL: R1 R11 D72 N94
    Date: 2021–05–11
  14. By: Giuliano, Paola; Tabellini, Marco
    Abstract: We test the relationship between historical immigration to the United States and political ideology today. We hypothesize that European immigrants brought with them their preferences for the welfare state, and that this had a long-lasting effect on the political ideology of US born individuals. Our analysis proceeds in three steps. First, we document that the historical presence of European immigrants is associated with a more liberal political ideology and with stronger preferences for redistribution among US born individuals today. Next, we show that this correlation is not driven by the characteristics of the counties where immigrants settled or other speci c, socioeconomic immigrants' traits. Finally, we provide evidence that immigrants brought with them their preferences for the welfare state from their countries of origin. Consistent with the hypothesis that immigration left its footprint on American ideology via cultural transmission from immigrants to natives, we show that our results are stronger when inter-group contact between natives and immigrants, measured with either intermarriage or residential integration, was higher. Our fi ndings also indicate that immigrants influenced American political ideology during one of the largest episodes of redistribution in US history--the New Deal-- and that such effects persisted after the initial shock.
    Keywords: cultural transmission; Immigration; Political Ideology; Preferences for Redistribution
    JEL: D64 D72 H2 J15 N32 Z1
    Date: 2020–05
  15. By: Ken-Ichi Shimomura (Research Institute for Economics and Business Administration(RIEB), Kobe University, JAPAN)
    Abstract: We address the problem of predicting how rational agents will form coalitions in a nontransferable utility game, and within each coalition how they will allocate the gains obtained through cooperation. To answer these questions, we propose solution concepts according to which the coalition structure and the payoff allocations are simultaneously determined. We prove the nonemptiness and partial efficiency of the steady bargaining set, a refinement of the Zhou bargaining set, for at least one coalition structure under the restrictive non-crossing condition. In addition, we show the nonemptiness and possible inefficiency of the Mas-Colell bargaining set if this condition is not assumed.
    Keywords: Nontransferable utility game; Coalition structure; Bargaining set; Restrictive non-crossing condition
    JEL: C71 D71
    Date: 2021–06

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