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From Equals to Despots: The Dynamics of Repeated Group Decision Taking with Private Information

Author

Listed:
  • William Fuchs

    (University of Chicago)

  • Vinicius Carrasco

    (PUC Rio)

Abstract

This paper considers the problem faced by n agents who repeatedly have to take a joint action, cannot resort to side payments, and each period are privately informed about their favorite actions. We study the properties of the optimal contract in this environment. We establish that first best values can be arbitrarily approximated (but not achieved) when the players are extremely patient. Also, we show that the provision of intertemporal incentives necessarily leads to a dictatorial mechanism: in the long run the optimal scheme converges to the adoption of one player's favorite action.

Suggested Citation

  • William Fuchs & Vinicius Carrasco, 2009. "From Equals to Despots: The Dynamics of Repeated Group Decision Taking with Private Information," 2009 Meeting Papers 150, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:150
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    Cited by:

    1. Shadmehr, Mehdi, 2015. "Simple decision rules in small groups: Collegial rule vs. rotational rule," Journal of Economic Behavior & Organization, Elsevier, vol. 113(C), pages 51-63.

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