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Majority Rules and Incentives

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Author Info
Bård Harstad (Kellogg School of Management, Northwestern University)

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Abstract

A club's majority rule defines the number of members that must approve a policy proposed to replace the status quo. Since the majority rule thus dictates the extent to which winners must compensate losers, it also determines the incentives to invest in order to become a winner of anticipated projects. If the required majority is large, members invest too little because of a holdup problem; if it is small, members invest too much in order to become a member of the majority coalition. To balance these opposing forces, the majority rule should increase in the project's value and the club's enforcement capacity but decrease in the heterogeneity in preferences. Externalities can be internalized by adjusting the rule. With heterogeneity in size or initial conditions, votes should be appropriately weighted or double majorities required. Copyright (c) 2005 Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdfplus/10.1162/003355305775097551
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Publisher Info
Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 120 (2005)
Issue (Month): 4 (November)
Pages: 1535-1568
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Handle: RePEc:tpr:qjecon:v:120:y:2005:i:4:p:1535-1568

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Web page: http://mitpress.mit.edu/journals/

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  1. Bard Harstad, 2006. "Flexible Integration," Discussion Papers 1428, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  2. Jose Apesteguia & Miguel A. Ballester & Rosa Ferrer, 2006. "On the Justice of Voting Systems," Economics Working Papers 987, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  3. Paul Schure & Francesco Passerelli & David Scoones, 2007. "When the Powerful Drag Their Feet," Department Discussion Papers 0703, Department of Economics, University of Victoria. [Downloadable!]
  4. Brekke, Kjell Arne & Nyborg, Karine & Rege, Mari, 2005. "The Fear of Exclusion: Individual Effort when Group Formation is Endogenous," Memorandum 09/2005, Oslo University, Department of Economics. [Downloadable!]
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  5. Bard Hastad, 2007. "Strategic Delegation and Voting Rules," Discussion Papers 1442, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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This page was last updated on 2009-11-16.

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