nep-des New Economics Papers
on Economic Design
Issue of 2020‒06‒08
three papers chosen by
Alex Teytelboym
University of Oxford

  1. The Equivalence of the Minimal Dominant Set and the Myopic Stable Set for Coalition Function Form Games By P. Jean-Jacques Herings; László Á. Kóczy
  2. Optimal provision of a public good with costly exclusion By Nicolas Gravel; Michel Poitevin
  3. Strategic Voting in Two-Party Legislative Elections By Hughes, Niall

  1. By: P. Jean-Jacques Herings (Department of Economics, Maastricht University, P.O. Box 616, 6200 MD, Maastricht, The Netherlands.); László Á. Kóczy (Institute of Economics, Centre for Economic and Regional Studies, Tóth Kálmán u. 4., 1097 Budapest, Hungary And Department of Finance, Faculty of Economics and Social Sciences, Budapest University of Technology and Economics, Magyar tudósok körútja 2, 1117 Budapest, Hungary)
    Abstract: In cooperative games, the coalition structure core is, despite its potential emptiness, one of the most popular solutions. While it is a fundamentally static concept, the consideration of a sequential extension of the underlying dominance correspondence gave rise to a selection of non-empty generalizations. Among these, the payoff-equivalence minimal dominant set and the myopic stable set are defined by a similar set of conditions. We identify some problems with the payoff-equivalence minimal dominant set and propose an appropriate reformulation called the minimal dominant set. We show that replacing asymptotic external stability by sequential weak dominance leaves the myopic stable set unaffected. The myopic stable set is therefore equivalent to the minimal dominant set.
    Keywords: coalition structure core; sequential dominance
    JEL: C71
    Date: 2020–05
  2. By: Nicolas Gravel (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Michel Poitevin (CIREQ - Centre interuniversitaire de recherche en économie quantitative)
    Abstract: We examine the problem of providing a non-rival and excludable public good to individuals with the same preferences and differing contributing capacities. Exclusion from the public good is costly in the sense that if two different quantities of the public good are consumed in the community, then the sum of the costs of providing the two quantities must be borne. By contrast, costless exclusion only requires the cost of the largest quantity consumed of the public good to be financed. We show that despite its important cost, providing public goods in different quantities is often part of any optimal provision of public good when the public authority is imperfectly informed about the agents' contributive capacities. In the specific situation where individuals have an additively separable logarithmic utility function, we provide a complete characterization of the optimal exclusion structure in the two-type case. We also show that the preference for such a costly exclusion is more likely when the heterogeneity in the population or income is large, and when the aversion to utility inequality is important.
    Keywords: Mechanism design,Asymmetric information,Public goods,Costly exclusion
    Date: 2019–09
  3. By: Hughes, Niall
    Abstract: It is commonly thought that in an election with two parties there can be no strategic voting - voters simply vote for their preferred candidate. In this paper, I show that strategic voting comes to the fore in legislative elections with multiple policy dimensions. In sharp contrast to single-district elections, the intensity of a voter’s preference on each dimension is irrelevant for her voting decision. Instead, she votes solely based on the dimension which is most likely to be pivotal in the legislature. Anticipating this behaviour, candidates put forward a different set of policies than they would in a single-district election. For large elections I show that the implemented policy bundle: (a) is uniquely pinned down by voter preferences, (b) is preferred by a majority of districts on each dimension, (c) is a Condorcet winner, if one exists. These properties are not guaranteed in a single-district election. Furthermore, I show that (i) parliamentary systems generate superior policies to presidential systems and (ii) voter polarisation affects outcomes in single-district elections but not legislative elections.
    Keywords: Strategic Voting, Legislative Elections, Multi-dimensional Policy, Pivotal Voting, Plurality Rule, Large Elections
    JEL: C72 D72 D78
    Date: 2020–04–30

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