Ehrhart, Karl-Martin () (Universitaet Karlsruhe) Gardner, Roy (Indiana University and ZEI, University of Bonn) von Hagen, Jürgen (University of Bonn, Indiana University, and CEPR) Keser*, Claudia (IBM T.J. Watson Research Center, New York)
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This paper studies budget processes, both theoretically and experimentally. We give a sufficient condition for top-down and bottom-up budget processes to have the same voting equilibrium. Furthermore, at a voting equilibrium, it is not always true, as often presumed, that a top-down budget process leads to a smaller overall budget than does a bottom-up budget process. To test the implications for budget processes of voting equilibrium theory, we conduct a series of 128 voting experiments using subjects in a behavior laboratory. The experimental evidence from these experiments is well organized by voting equilibrium theory, both at the aggregate level and at the individual subject level. In particular, subjects display considerable evidence of rationality in their proposals and votes. More complete information and fewer spending categories lead to greater predictive success of voting equilibrium theory, and reduce the time needed to reach a budget decision.
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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number
04-57.
Length: 25 pages Date of creation: 03 Dec 2004 Date of revision: Handle: RePEc:xrs:sfbmaa:04-57
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged. Contact details of provider: Postal: D-68131 Mannheim Phone: (49) (0) 621-292-2547 Fax: (49) (0) 621-292-5594 Email: Web page: http://www.sfb504.uni-mannheim.de/ More information through EDIRC
Karl-Martin Ehrhart & Roy Gardner & Jürgen von Hagen & Claudia Keser, 2006.
"Budget Processes: Theory and Experimental Evidence,"
Discussion Papers
146, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
[Downloadable!]
Karl-Martin Ehrhart & Roy Gardner & Juergen von Hagen & Claudia Keser, 2006.
"Budget Processes: Theory and Experimental Evidence,"
Caepr Working Papers
2006-009, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
[Downloadable!]
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