IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/15172.html
   My bibliography  Save this paper

WHEN CONSENSUS CHOICE DOMINATES INDIVIDUALISM: Jensen's Inequality and Collective Decisions under Uncertainty

Author

Listed:
  • Charles F. Manski

Abstract

Research on collective provision of private goods has focused on distributional considerations. This paper studies a class of problems of decision under uncertainty in which the argument for collective choice emerges from the mathematics of aggregating individual payoffs. Consider decision making when each member of a population has the same objective function, which depends on an unknown state of nature. If agents knew the state of nature, they would make the same decision. However, they may have different beliefs or may use different decision criteria. Hence, they may choose different actions even though they share the same objective. Let the set of feasible actions be convex and the objective function be concave in actions, for all states of nature. Then Jensen's inequality implies that consensus choice of the mean privately-chosen action yields a larger aggregate payoff than does individualistic decision making, in all states of nature. If payoffs are transferable, the aggregate payoff from consensus choice may be allocated to Pareto dominate individualistic decision making, in all states of nature. I develop these ideas. I also use Jensen's inequality to show that a planner with the power to assign actions to the members of the population should not diversify. Finally, I give a version of the collective choice result that holds with consensus choice of the median rather than mean action.

Suggested Citation

  • Charles F. Manski, 2009. "WHEN CONSENSUS CHOICE DOMINATES INDIVIDUALISM: Jensen's Inequality and Collective Decisions under Uncertainty," NBER Working Papers 15172, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15172 Note: PE POL
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w15172.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hanming Fang & Peter Norman, 2014. "Toward an efficiency rationale for the public provision of private goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 375-408, June.
    2. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March.
    3. Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583.
    4. Blomquist, Suren & Christiansen, Vidar, 1995. " Public Provision of Private Goods as a Redistributive Device in an Optimum Income Tax Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 547-567, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas Kniesner & W. Viscusi & James Ziliak, 2010. "Policy relevant heterogeneity in the value of statistical life: New evidence from panel data quantile regressions," Journal of Risk and Uncertainty, Springer, vol. 40(1), pages 15-31, February.
    2. Hanming Fang & Peter Norman, 2014. "Toward an efficiency rationale for the public provision of private goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 375-408, June.
    3. Moshe Ben-Akiva & André Palma & Daniel McFadden & Maya Abou-Zeid & Pierre-André Chiappori & Matthieu Lapparent & Steven Durlauf & Mogens Fosgerau & Daisuke Fukuda & Stephane Hess & Charles Manski & Ar, 2012. "Process and context in choice models," Marketing Letters, Springer, vol. 23(2), pages 439-456, June.
    4. Konstadinos G. Goulias & Ram M. Pendyala, 2014. "Choice context," Chapters,in: Handbook of Choice Modelling, chapter 5, pages 101-130 Edward Elgar Publishing.

    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:15172. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.