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Optimal voting schemes with costly information acquisition

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  • Gershkov, Alex
  • Szentes, Balázs

Abstract

A group of individuals with identical preferences must make a decision under uncertainty about which decision is best. Before the decision is made, each agent can privately acquire a costly and imperfect signal. We discuss how to design a mechanism for eliciting and aggregating the collected information so as to maximize ex-ante social welfare. We first show that, of all mechanisms, a sequential one is optimal and works as follows. At random, one agent at a time is selected to acquire information and report the resulting signal. Agents are informed of neither their position in the sequence nor of other reports. Acquiring information when called upon and reporting truthfully is an equilibrium. We next characterize the ex-ante optimal scheme among all ex-post efficient mechanisms. In this mechanism, a decision is made when the precision of the posterior exceeds a cut-off that decreases with each additional report. The restriction to ex-post efficiency is shown to be without loss when the available signals are sufficiently imprecise. On the other hand, ex-post efficient mechanisms are shown to be suboptimal when the cost of information acquisition is sufficiently small.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 1 (January)
Pages: 36-68

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:1:p:36-68

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Information aggregation Voting;

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  1. Timothy Feddersen & Wolfgang Pesendorfer, 1994. "Voting Behavior and Information Aggregation in Elections with Private Information," Discussion Papers 1117, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Hao Li & Sherwin Rosen & Wing Suen, 2000. "Conflicts and Common Interests in Committees," Econometric Society World Congress 2000 Contributed Papers 0341, Econometric Society.
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  6. Timothy J. Feddersen & Wolfgang Pesendorfer, 1995. "The Swing Voter's Curse," Discussion Papers 1064, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. César Martinelli, 2004. "Would Rational Voters Acquire Costly Information?," Levine's Bibliography 122247000000000593, UCLA Department of Economics.
  8. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
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  10. Roger B. Myerson, 1984. "Multistage Games with Communication," Discussion Papers 590, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Hao Li, 2001. "A Theory of Conservatism," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 617-636, June.
  12. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  13. Kaushik Mukhopadhaya, 2003. "Jury Size and the Free Rider Problem," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 24-44, April.
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  15. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
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