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On the Optimal Number of Representatives

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  • Emmanuelle Auriol
  • Robert J. Gary-Bobo

Abstract

We study a model of public decision-making in simple public goods economies with moral hazards and adverse selection. Economic agents must invest resources (or provide effort) to discover their own preferences. We consider direct revelation mechanisms based on sampling. A sample of agents is drawn in the population, and each member of the sample reports a preferences type to a Principal. The determinants of the "representative sample" size are studied. The structure and magnitude of effort and sampling costs affects the optimal number of representatives. If the net social value of the effort is high, first and second best optimality require a maximal sample (or "direct democracy"). If, on the contrary, effort is too costly, the recourse to samples ("representative democracy") is justified as a second best. To obtain the results, we not only take effort and revelation incentives into account, but also restrict decision rules to satisfy an additional property of robustness to opportunistic manipulation by the Principal, which forbids the use of a priori knowledge in public decision procedures.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1286.

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Date of creation: Feb 1998
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Handle: RePEc:nwu:cmsems:1286

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Cited by:
  1. Auriol, Emmanuelle & Gary-Bobo, Robert, 2001. "On Robust Constitution Design," IDEI Working Papers 136, Institut d'Économie Industrielle (IDEI), Toulouse, revised Aug 2006.
  2. Auriol, Emmanuelle & Gary-Bobo, Robert, 2008. "On the Optimal Number of Representatives," IDEI Working Papers 86, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Piolatto, Amedeo, 2011. "Plurality versus proportional electoral rule: Which is most representative of voters?," European Journal of Political Economy, Elsevier, vol. 27(2), pages 311-327, June.
  4. Gerardi, Dino & Yariv, Leeat, 2008. "Information acquisition in committees," Games and Economic Behavior, Elsevier, vol. 62(2), pages 436-459, March.
  5. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central Bank boards around the world: why does membership size differ?," Discussion Papers 2008/5, Free University Berlin, School of Business & Economics.
  6. Dino Gerardi & Leeat Yariv, 2003. "Committee Design in the Presence of Communication," Cowles Foundation Discussion Papers 1411, Cowles Foundation for Research in Economics, Yale University.

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