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Why Voting? A Welfare Analysis

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  • Kleiner, Andreas
  • Drexl, Moritz

Abstract

Which decision rule should we use to make a binary collective choice? While voting procedures are applied ubiquitously, they are criticized for being inefficient. Using monetary transfers, efficient choices can be made at the cost of a budget imbalance. Is it optimal to do so? And why are monetary transfers used only rarely in public decision making? We solve for the welfare maximizing social choice function taking monetary transfers explicitly into account. Under a mild regularity assumption on the distribution of types, we show that the optimal anonymous social choice function is implementable through qualified majority voting. Our result shows that using a VCG mechanism is not superior to voting in general and justifies the use of voting mechanisms. It thereby could explain why many decision rules employed in practice do not rely on monetary transfers.

Suggested Citation

  • Kleiner, Andreas & Drexl, Moritz, 2013. "Why Voting? A Welfare Analysis," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79886, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79886
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    Cited by:

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    3. Grüner, Hans Peter & Engelmann, Dirk & Possajennikov, Alex & Hoffmann, Timo, 2020. "Minority Protection in Voting Mechanisms - Experimental Evidence," CEPR Discussion Papers 14393, C.E.P.R. Discussion Papers.
    4. Hagen, Martin, 2023. "Collusion-proof mechanisms for multi-unit procurement," Games and Economic Behavior, Elsevier, vol. 138(C), pages 281-298.
    5. Mackenzie, Andrew & Trudeau, Christian, 2023. "On Groves mechanisms for costly inclusion," Theoretical Economics, Econometric Society, vol. 18(3), July.
    6. Tobias Rachidi, 2020. "Optimal Voting Mechanisms on Generalized Single-Peaked Domains," CRC TR 224 Discussion Paper Series crctr224_2020_214, University of Bonn and University of Mannheim, Germany.
    7. Hagen, Martin & Hernando-Veciana, Ángel, 2021. "Multidimensional bargaining and posted prices," Journal of Economic Theory, Elsevier, vol. 196(C).
    8. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Mechanism Design without Money," Working Papers tecipa-481, University of Toronto, Department of Economics.
    9. Bierbrauer, Felix & Winkelmann, Justus, 2020. "All or nothing: State capacity and optimal public goods provision," Journal of Economic Theory, Elsevier, vol. 185(C).

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    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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