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Why Voting? A Welfare Analysis

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  • Kleiner, Andreas
  • Drexl, Moritz
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    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. --

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    Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79886.

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    Date of creation: 2013
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    Handle: RePEc:zbw:vfsc13:79886

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    1. Chakravarty, Surajeet & Kaplan, Todd R., 2006. "Optimal Allocation without Transfer Payments," MPRA Paper 18481, University Library of Munich, Germany, revised 02 Mar 2009.
    2. Salvador Barbera & Matthew O. Jackson, 2006. "On the Weights of Nations: Assigning Voting Weights in a Heterogeneous Union," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 317-339, April.
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    8. Nehring, Klaus, 2004. "The veil of public ignorance," Journal of Economic Theory, Elsevier, vol. 119(2), pages 247-270, December.
    9. Alex Gershkov & Jacob Goeree & Alexey Kushnir & Benny Moldovanu & Xianwen Shi, 2012. "On the Equivalence of Bayesian and Dominant Strategy Implementation," Working Papers tecipa-445, University of Toronto, Department of Economics.
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    Cited by:
    1. Gershkov, Alex & Moldovanu, Benny & Shi, Xianwen, 2013. "Optimal Voting Rules," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 417, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Mechanism Design without Money," Working Papers tecipa-481, University of Toronto, Department of Economics.

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