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Why Voting? A Welfare Analysis

  • Kleiner, Andreas
  • Drexl, Moritz

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
Contact details of provider: Web page: http://www.socialpolitik.org/
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