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Majority Rules and Incentives

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  • B�rd Harstad

    (Kellogg School of Management, Northwestern University)

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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Bibliographic 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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Cited by:
  1. Salvador Barberà & Matthew O. Jackson, 2003. "On the Weights of Nations: Assigning Voting Weights in a Heterogeneous Union," Working Papers 220, Barcelona Graduate School of Economics.
  2. Simon, Jenny & Valasek, Justin Mattias, 2012. "Efficient fiscal spending by supranational unions," Discussion Papers, Research Unit: Economics of Change SP II 2012-305, Social Science Research Center Berlin (WZB).
  3. Hans Gersbach, 2010. "Democratic Provision of Divisible Public Goods," CESifo Working Paper Series 2939, CESifo Group Munich.
  4. Kjell Arne Brekke & Karine Nyborg & Mari Rege, 2007. "The Fear of Exclusion: Individual Effort when Group Formation is Endogenous," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 531-550, 09.
  5. Alessandro Riboni, 2013. "Ideology and endogenous constitutions," Economic Theory, Springer, vol. 52(3), pages 885-913, April.
  6. Bard Hastad, 2007. "Strategic Delegation and Voting Rules," Discussion Papers 1442, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Bard Harstad, 2006. "Flexible Integration," Discussion Papers 1428, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Battaglini, Marco & Nunnari, Salvatore & Palfrey, Thomas, 2011. "Legislative bargaining and the dynamics of public investment," Discussion Papers, Research Unit: Market Behavior SP II 2011-205, Social Science Research Center Berlin (WZB).
  9. Corinna Ahlfeld, 2010. "Reputation Sells -Compensation Payments in the Political Sphere," Departmental Discussion Papers 145, University of Goettingen, Department of Economics.
  10. Paul Schure & Francesco Passerelli & David Scoones, 2007. "When the Powerful Drag Their Feet," Department Discussion Papers 0703, Department of Economics, University of Victoria.
  11. Baron, David P., 2011. "Credence attributes, voluntary organizations, and social pressure," Journal of Public Economics, Elsevier, vol. 95(11), pages 1331-1338.
  12. Hans Gersbach, 2011. "On the limits of democracy," Social Choice and Welfare, Springer, vol. 37(2), pages 201-217, July.
  13. Robert Oxoby, 2013. "Paretian dictators: constraining choice in a voluntary contribution game," Constitutional Political Economy, Springer, vol. 24(2), pages 125-138, June.
  14. 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.

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