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The Effect of Democratic Decision Making on Investment in Reputation

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  • BEN-YASHAR, Ruth
  • KRAUSZ, Miriam
  • NITZAN, Shmuel

Abstract

Students wish to increase the probability of being admitted to a prestigious school. Job candidates are interested in the probability of getting a desirable job. Defendants are concerned about the probability of being acquitted. In all such binary settings, the probability of the desirable outcome to individuals can be affected by their reputation. Applying a standard uncertain dichotomous choice benchmark setting, we focus on how the nature of the applied decision-making rule affects the individuals' incentive to invest in improvement of their reputation. Our main results establish that a democratic (non - democratic) decision-making system based on the simple majority (unanimity) rule ensures maximal (minimal) marginal productivity of reputation that increases (decreases) with the size of the decision-making committee.

Suggested Citation

  • BEN-YASHAR, Ruth & KRAUSZ, Miriam & NITZAN, Shmuel, 2017. "The Effect of Democratic Decision Making on Investment in Reputation," Discussion paper series HIAS-E-59, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    • Handle: RePEc:hit:hiasdp:hias-e-59
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    References listed on IDEAS

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    10. Bar-Isaac, Heski & Deb, Joyee, 2014. "What is a good reputation? Career concerns with heterogeneous audiences," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 44-50.
    11. Ben-Yashar, Ruth C & Nitzan, Shmuel I, 1997. "The Optimal Decision Rule for Fixed-Size Committees in Dichotomous Choice Situations: The General Result," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 175-186, February.
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    More about this item

    Keywords

    decision making structure; investment in reputation;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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