Information efficiency and majority decisions

The analysis is concerned with the characterization of equilibria of a two-stage voting game involving private information acquisition. Rational ignorance and information efficiency are identified. It turns out that information efficiency is not always desirable. By restricting the payoff domain, we are able to characterize completely the set of equilibria. In this case, information acquisition by few voters benefits a majority, or even the whole community. Economic Literature Classification Number D70, D71, D80.The author would like to thank Peter Bernholz, MartinHellwig, Tilman Börgers, Harald Nedwed and a referee for helpful comments and suggestions.     

Public information and social choice

We examine the value of public information when a society uses a social choice rule to decide among a set of outcomes. We require that a social choice function satisfies unrestricted domain, non-decisiveness and the Pareto principle. We show that there exist payoff structures for every social choice function, such that an arbitrary subset of voters is worse off by public information. We apply the proposition to collective information acquisition and to irreversible investments. Received: 2 June 1997/Accepted: 30 September 1998     

“Hard workers” and labor restrictions

This paper analyzes the effects of changes in relative bargaining power within two-member households participating in labor and product markets. The most striking effects occur when household members differ in individual preferences and enjoy positive leisure-dependent externalities. For instance, a global change in relative bargaining power where the hardworking member becomes more influential in each working class household can render the working class worse off. Moreover, we show that restrictions on labor supply can prevent hard workers from exerting too much pressure on their hedonistic partners to work more. A restriction on individual labor supply improves welfare of the working class population, which adds a new twist to the literature on why working hours are limited in many European countries.     

Bargaining power and equilibrium consumption

We examine how a shift of bargaining power within households operating in a competitive market environment affects equilibrium allocation and welfare. If price effects are sufficiently small, then typically an individual benefits from an increase of bargaining power, necessarily to the detriment of others. If price effects are drastic, the welfare of all household members moves in the same direction when bargaining power shifts, at the expense (or for the benefit) of outside consumers. Typically a shift of bargaining power within a set of households also impacts upon other households. We show that each individual of a sociological group tends to benefit, if he can increase his bargaining power, but suffers if others in his group do the same.     

DEMOCRATIC MECHANISMS

We introduce democratic mechanisms as a set of rules that must obey liberal democracy's fundamental principles of equal voting and agenda rights. We show that an appropriate combination of three rules may yield efficient provision of public projects: first, flexible and double majority rules, where the size of the majority depends on the proposal, and taxed and non‐taxed individuals need to support the proposal; second, flexible agenda costs, where the agenda‐setter has to pay a certain amount of money if his proposal does not generate enough supporting votes; third, a ban on subsidies. We highlight that universal equal treatment with regard to taxation is undesirable. Finally, we illustrate how simple constitutions involving fixed super majority rules yield socially desirable outcomes if the agenda‐setter is benevolent. (JEL: D62, D72, H40)