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Learning While Voting: Determinants of Collective Experimentation

  • Bruno Strulovici

This paper combines dynamic social choice and strategic experimentation to study the following question: How does a society, a committee, or, more generally, a group of individuals with potentially heterogeneous preferences, experiment with new opportunities? Each voter recognizes that, during experimentation, other voters also learn about their preferences. As a result, pivotal voters today are biased against experimentation because it reduces their likelihood of remaining pivotal. This phenomenon reduces equilibrium experimentation below the socially efficient level, and may even result in a negative option value of experimentation. However, one can restore efficiency by designing a voting rule that depends deterministically on time. Another main result is that even when payoffs of a reform are independently distributed across the population, good news about any individual's payoff increases other individuals' incentives to experiment with that reform, due to a positive voting externality. Copyright 2010 The Econometric Society.

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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 78 (2010)
Issue (Month): 3 (05)
Pages: 933-971

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Handle: RePEc:ecm:emetrp:v:78:y:2010:i:3:p:933-971
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  1. Cripps, Martin & Keller, Godfrey & Rady, Sven, 2003. "Strategic Experimentation with Exponential Bandits," Discussion Papers in Economics 4, University of Munich, Department of Economics.
  2. Albrecht, James & Anderson, Axel Z. & Vroman, Susan, 2007. "Search by Committee," IZA Discussion Papers 3137, Institute for the Study of Labor (IZA).
  3. Hayne E. Leland., 1994. "Corporate Debt Value, Bond Covenants, and Optimal Capital Structure," Research Program in Finance Working Papers RPF-233, University of California at Berkeley.
  4. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
  5. Bergemann, Dirk & Hege, Ulrich, 1998. "Venture capital financing, moral hazard, and learning," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 703-735, August.
  6. Philippe Jehiel & Oliver Compte, 2007. "Bargaining and Majority Rules: A Collective Search Perspective," Levine's Bibliography 843644000000000131, UCLA Department of Economics.
  7. Mattias K. Polborn & Matthias Messner, 2008. "The option to wait in collective decisions," 2008 Meeting Papers 397, Society for Economic Dynamics.
  8. Bergemann, Dirk & Hege, Ulrich, 2001. "The Financing of Innovation: Learning and Stopping," CEPR Discussion Papers 2763, C.E.P.R. Discussion Papers.
  9. Kuran, Timur, 1988. "The tenacious past: Theories of personal and collective conservatism," Journal of Economic Behavior & Organization, Elsevier, vol. 10(2), pages 143-171, September.
  10. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
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