The Impact of Voting in Small Committees & Returns

Abstract (Balduzzi & Luporini)

We analyze the voting behavior of a small committee that has to approve or reject a proposal whose return is uncertain. Members have heterogenous preferences: some members want to maximize the expected value while other members have a bias toward project approval and ignore their private information. We analyze different voting games when information is costless and communication is not possible, and we provide insights on the optimal composition of these committees. Our main result is that the presence of biased members can improve the voting outcome by simplifying the strategies of unbiased members. Thus, committees with heterogeneous members can function at least as well as homogeneous committees and in some cases they perform better. In particular, when value-maximizing members hold 51% of votes, the socially optimal equilibrium becomes unique.

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03. February 2011 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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