Learning While Voting: Determinants of Collective Experimentation

This paper combines dynamic social choice and strategic experimentation to study the following question: How does a society, a committee, or, more generally, a group of individuals with potentially heterogeneous preferences, experiment with new opportunities? Each voter recognizes that, during experimentation, other voters also learn about their preferences. As a result, pivotal voters today are biased against experimentation because it reduces their likelihood of remaining pivotal. This phenomenon reduces equilibrium experimentation below the socially efficient level, and may even result in a negative option value of experimentation. However, one can restore efficiency by designing a voting rule that depends deterministically on time. Another main result is that even when payoffs of a reform are independently distributed across the population, good news about any individual's payoff increases other individuals' incentives to experiment with that reform, due to a positive voting externality.     

Shareholders ad Corprate Elections

Concern about the need to address the problem of conflicts of interest between management and shareholders has led to calls on shareholders to exercise their voting rights at the annual general meetings. It is argued here that the distribution of shareholding in the UK companies creates a complex pattern of incentives and disincentives for the holders of even larger blocks of shares to participate in the voting process. Whether the effort to participate is rewarded depends in an unpredictable manner on the distribution of large block shareholdings, and also on the percentage of the holders of small parcels who exercise their right to vote. A clear choice set is needed to arrive at a rational decision concerning the exercise of franchise, but that is not available.     

How to Win “Spend” and Influence Partners: Lessons in Behavioral Operations from the Outsourcing Game

The Outsourcing Game is a role‐play simulation that has been deployed in industry and academic training courses worldwide. It incorporates the concepts of hidden actions, hidden information, and misaligned incentives, and conveys messages about power, trust, and reputation. The game depicts the adventures of Acme, the brand owner of a product manufactured by an outsourced supply chain. Through a series of negotiations, Acme attempts to influence its partners (two suppliers and two service providers) by distributing its procurement “spend.” These partners, in turn, sway each other via side payments. To simulate the non‐linear shifts in power that occur as outsourcing increases, we represent decision‐making by a voting scheme with uneven vote allocations. This paper analyzes a database of game results to reveal behavioral factors that can undermine conspicuous win–win process improvements. For instance, preferences can be sensitive to the sequence in which the alternatives are encountered; decision‐makers might value not only their own rewards, but also fairness in the allocation of total gains; and effectiveness of negotiation tactics will vary with community norms of acceptable behavior. Along the way we extend the political economics literature about power in block‐based voting by proposing a heuristic approach for incorporating voter preferences.     

Corporate Governance and Shareholder Franchise

This paper addresses a question arising out ofcalls for greater shareholder participation toensure accountability of management in publiclimited companies. It is argued here that theparticipation by shareholders in corporateelections is more difficult than it isenvisaged by those who issue clarion calls forshareholders to exercise their voting power.The exercise of the right to vote as ashareholder can be formulated as a game betweenshareholders and management and also amongstgroups of shareholders. The chances of anyparticular group of shareholders being able toinfluence policy depends on how other groupsof shareholders vote. Thus the organisationaltask in the exercise of the right to franchiseis more complicated than it is realised byenthusiasts for shareholder participation.     

Social Indeterminacy

An extension of Condorcet's paradox by McGarvey (1953) asserts that for every asymmetric relation R on a finite set of candidates there is a strict‐preferences voter profile that has the relation R as its strict simple majority relation. We prove that McGarvey's theorem can be extended to arbitrary neutral monotone social welfare functions that can be described by a strong simple game G if the voting power of each individual, measured by the Shapley–Shubik power index, is sufficiently small. Our proof is based on an extension to another classic result concerning the majority rule. Condorcet studied an election between two candidates in which the voters' choices are random and independent and the probability of a voter choosing the first candidate is p>1/2. Condorcet's jury theorem asserts that if the number of voters tends to infinity then the probability that the first candidate will be elected tends to one. We prove that this assertion extends to a sequence of arbitrary monotone strong simple games if and only if the maximum voting power for all individuals tends to zero.     

Security-voting structure and equity financing in the banking sector: ‘one head-one vote’ versus ‘one share-one vote’

Using a unique dataset including all rights issues of new shares and other equity-like securities announced by Italian listed banks between 1989 and 2014, and exploiting the ideal setting provided by the Italian Banking Law, which allows for listed co-operative banks, we test if the ‘one head-one vote’ principle of co-operative banks and the ‘one share-one vote’ voting system of joint stock banks imply different costs of equity. Our empirical results, obtained using an event-study methodology, regressions and matching estimators, support our research hypothesis that the one head-one vote principle makes it more difficult raising new capital compared to one share-one vote principle, and contribute to the literature on demutualization and cooperative hybrids.

     

COMPARISON OF CONSENSUS METHODS FOR PRIORITY RANKING PROBLEMS

Various consensus methods proposed for ranking problems yield controversial rankings and/or tied rankings which are vulnerable to considerable dispute. These include Borda-Kendall (BK) and minimum-variance (MV) methods. This paper compares three continuous (ratio-scale) consensus scoring methods with BK and MV ranking methods. One method, termed GM, is an eigenvector scaling of the geometric-mean consensus matrix. GM allows for (1) paired-comparison voting inputs (as opposed to all-at-once ranking), (2) pick-the-winner preference voting, and (3) ratio-scale preference voting. GM is relatively simple to calculate on small computers or calculators, and merging of “close” candidates into tied rankings can be achieved by using an e-threshold tie rule discussed in this paper. The GM method thus can be used for paired-comparison voting to calculate both a ratio-scaled consensus index (based on a consensus eigenvector) and a ranking of candidates that allows for ties between “close” candidates. Eigenvalue analysis is used as a means of evaluating voter inconsistencies.     

Carrots or Sticks? Improving Social and Environmental Compliance at Suppliers Through Incentives and Penalties

Firms are increasingly looking to eradicate social and environmental non‐compliances at their suppliers in response to increasing regulations, consumer demand, potential for supply chain disruptions, and to improve their social, environmental, and economic supply chain performance. This study develops a model of the relationship between the buyer's supplier incentives and penalties for the supplier's social and environmental compliance, and the outcomes in terms of reduction in supplier social and environmental violations as well as the buyer's own operating costs. This model is tested empirically through analysis of a dataset of opinion‐based survey responses from practitioners at 334 companies across 17 industries. The analysis finds specific penalties and incentives that are positively associated with reduced supplier violations and reduced buyer operating costs. In particular, offering suppliers incentives of increased business and training for improving social and environmental performance is strongly associated with a reduction in both violations and operating costs.     

THE BALANCED US PRESS

We measure the relative ideological positions of newspapers, voters, interest groups, and political parties, using data on ballot propositions. We exploit the fact that newspapers, parties, and interest groups take positions on these propositions, and the fact that citizens ultimately vote on them. We find that, on average, newspapers in the United States are located almost exactly at the median voter in their states—that is, they are balanced around the median voter. Still, there is a significant amount of ideological heterogeneity across newspapers, which is smaller than the one found for interest groups. However, when we group propositions by issue area, we find a sizable amount of ideological imbalance: broadly speaking, newspapers are to the left of the state‐level median voter on many social issues, and to the right on many economic issues. To complete the picture, we use two existing methods of measuring bias and show that the news and editorial sections of newspapers have almost identical partisan positions.     

Ordinally Bayesian Incentive Compatible Voting Rules

We study strategic voting after weakening the notion of strategy‐proofness to Ordinal Bayesian Incentive Compatibility (OBIC). Under OBIC, truth‐telling is required to maximize the expected utility of every voter, expected utility being computed with respect to the voter's prior beliefs and under the assumption that everybody else is also telling the truth. We show that for a special type of priors, i.e., the uniform priors, there exists a large class of social choice functions that are OBIC. However, for priors that are generic in the set of independent beliefs, a social choice function is OBIC only if it is dictatorial. This result underlines the robustness of the Gibbard–Satterthwaite Theorem.     

Preference Monotonicity and Information Aggregation in Elections

If voter preferences depend on a noisy state variable, under what conditions do large elections deliver outcomes “as if” the state were common knowledge? While the existing literature models elections using the jury metaphor where a change in information regarding the state induces all voters to switch in favor of only one alternative, we allow for more general preferences where a change in information can induce a switch in favor of either alternative. We show that information is aggregated for any voting rule if, for a randomly chosen voter, the probability of switching in favor of one alternative is strictly greater than the probability of switching away from that alternative for any given change in belief over states. If the preference distribution violates this condition, there exist equilibria that produce outcomes different from the full information outcome with high probability for large classes of voting rules. In other words, unless preferences closely conform to the jury metaphor, information aggregation is not guaranteed to obtain.     

Kundenintegration 2.0 – Welche Faktoren beeinflussen die Kundenintegration in transaktionsbasierten Online Communities?

The long-term existence of online communities of transaction mainly depends on the participation of their members. Despite this importance, up to now no studies have empirically investigated the drivers of customer participation in those online communities which are growing in number. The present paper contributes to this research gap by developing a comprehensive model analyzing member-specific, social and provider-specific determinants of customer participation in online communities of transaction. This model is based on two so far rather isolated research streams: traditional customer participation research and online community research. By testing our theoretical model using data generated in an online community of transaction, we identify member-specific drivers to be most important. Thus, providers of these online communities should put an emphasis on marketing activities that have an impact on the community members’ enjoyment and expertise. Moreover, the perceived interactional justice of the interaction within the community and the anticipated saving of money stimulate customer participation as well. Quite unexpectedly, we find social identification and positive network effects to have a negative influence on customer participation.     

虚拟品牌社区中内、外部激励对顾客契合的影响研究

从认知学派削弱论剖析出“侵蚀”视角,基于自我决定理论,构建一个以顾客参与、顾客信任和顾客认同为中介的链式中介模型,探究内、外部激励对顾客契合的影响机制,以及内、外部激励间是否存在“侵蚀”效用。运用层次回归法和Bootstrap法对数据进行分析,研究发现:①内、外部激励之间存在“侵蚀”效用,且对内、外部激励存在“单独拉升-总体抑制”效果;②激励措施不能单独通过顾客参与作用于顾客契合,顾客参与和顾客契合路径还有中介变量待发掘;③“顾客参与—顾客信任”和“顾客参与—顾客认同”链式中介作用显著。     

The Impact of Investor Horizon on Say‐on‐Pay Voting

Shareholder investment horizons have a significant impact on say‐on‐pay voting patterns. Short‐term investors are more likely to avoid expressing opinion on executive pay proposals by casting an abstaining vote. They vote against board proposals on pay only in cases where the CEO already receives excessive pay levels. In contrast, long‐term investors typically cast favourable votes. According to our findings, this is due to effective monitoring rather than collusion with the management. Overall, investor heterogeneity in terms of investment horizons helps explain say‐on‐pay voting, in particular the low levels of say‐on‐pay dissent, which have recently raised questions over the efficiency of this corporate governance mechanism .     

GROUP INEQUALITY

We explore the combined effect of segregation in social networks, peer effects, and the relative size of a historically disadvantaged group on the incentives to invest in market‐rewarded skills and the dynamics of inequality between social groups. We identify conditions under which group inequality will persist in the absence of differences in ability, credit constraints, or labor market discrimination. Under these conditions, group inequality may be amplified even if initial group differences are negligible. Increases in social integration may destabilize an unequal state and make group equality possible, but the distributional and human capital effects of this depend on the demographic composition of the population. When the size of the initially disadvantaged group is sufficiently small, integration can lower the long‐run costs of human capital investment in both groups and result in an increase the aggregate skill share. In contrast, when the initially disadvantaged group is large, integration can induce a fall in the aggregate skill share as the costs of human capital investment rise in both groups. We consider applications to concrete cases and policy implications.     

CEO Incentives,Takeover Protection and Corporate Innovation

This study examines the effects of CEO equity‐based compensation and anti‐takeover provisions on corporate innovation. Using a large sample of US firms over the period 1996–2014, we find that long‐term incentives have a stronger influence on innovation when combined with takeover threats. We also show that equity‐based compensation is more likely to spur innovation for small firms and firms in industries with high product market competition and innovation pressure. However, this effect is somewhat weaker in the presence of anti‐takeover provisions, suggesting that takeover protection encourages managerial shirking even when external competition is high. Finally, in addition to the existing evidence on the valuation effect of CEO equity‐based compensation, we identify innovation as an important channel through which managerial incentives can enhance firm value. Our results have potential implications for shareholders, managers and policymakers.     

WHY VOTE FOR LOSERS?

Voting theory generally concludes that, in first‐past‐the‐post elections, all votes should go to effective candidates (Duverger's Law), and parties should adopt a similar platform (median voter theorem). However, such predictions are not always met in practice. We show why divergence and vote dispersion is a natural outcome when (a) parties are opportunistic, (b) there is uncertainty on the position of the median voter and (c) elections are repeated. “Voting for losers” increases the informational content of elections, and may induce mainstream parties to relocate towards extremists. As a result, to maximize their probability of being elected, they do not adopt median platforms, but instead diverge to a certain extent. (JEL: D72, D81)     

Strategic Candidacy and Voting Procedures

We study the incentives of candidates to strategically affect the outcome of a voting procedure. We show that the outcomes of every nondictatorial voting procedure that satisfies unanimity will be affected by the incentives of noncontending candidates (i.e., who cannot win the election) to influence the outcome by entering or exiting the election.     

A STRUCTURAL MODEL OF TURNOUT AND VOTING IN MULTIPLE ELECTIONS

This paper develops a unified approach to study participation and voting in multiple elections. The theoretical setting combines an uncertain‐voter model of turnout with a spatial model of voting behavior. We apply our framework to the study of turnout and voting in US Presidential and Congressional elections. We structurally estimate the model using individual‐level data for the 2000 elections, and quantify the relationships between observed individual characteristics and unobserved citizens’ ideological preferences, information, and civic duty. We then use the estimated model, which replicates the patterns of abstention, selective abstention, split‐ticket voting, and straight‐ticket voting observed in the data, to assess the effects of policies that may increase citizens’ information and sense of civic duty on their turnout and voting behavior.     

The adoption of deferred share unit plans for outside directors: economic and social determinants

This paper investigates the antecedents of adopting deferred compensation plans for corporate directors. Relying on agency and network theories, we compare the economic and social characteristics of firms that have adopted a deferred share unit plan for their directors over the 1997–2005 period (130 firms) to a control sample. Our findings show that firms where outside directors have higher agency costs, firms having a block holder that owns a significant voting power, firms whose outside directors serve on other boards having adopted deferred compensation plans, and firms that hire compensation consultants are more likely to adopt a deferred share unit plan for their directors than other firms. These findings highlight the importance of integrating economic and social perspectives when investigating the diffusion of compensation practices.