Multiple solutions under quasi-exponential discounting
AbstractWe consider a group or committee that faces a binary decision under uncertainty. Each member holds some private information. Members agree which decision should be taken in each state of nature, had this been known, but they may attach different values to the two types of mistake that may occur. Most voting rules have a plethora of uninformative equilibria, and informative voting may be incompatible with equilibrium. We analyze an anonymous randomized majority rule that has a unique equilibrium. This equilibrium is strict, votes are informative, and the equilibrium implements the optimal decision with probability one in the limit as the committee size goes to infinity. We show that this also holds for the usual majority rule under certain perturbations of the behavioral assumptions: (i) a slight preference for voting according to one's conviction, and (ii) transparency and a slight preference for esteem. We also show that a slight probability for voting mistakes strengthens the incentive for informative voting.
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Date of creation: Mar 2008
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: time-consistency; hyperbolic discounting; stochastic dynamic programming; multiplicity; uniqueness.;
Other versions of this item:
- Nicolas Vieille & Jörgen Weibull, 2009. "Multiple solutions under quasi-exponential discounting," Economic Theory, Springer, vol. 39(3), pages 513-526, June.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
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