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Why Voting? A Welfare Analysis

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  • Kleiner, Andreas
  • Drexl, Moritz

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.

Suggested Citation

  • Kleiner, Andreas & Drexl, Moritz, 2013. "Why Voting? A Welfare Analysis," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79886, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:79886
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    References listed on IDEAS

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    1. repec:eee:gamebe:v:104:y:2017:i:c:p:468-485 is not listed on IDEAS
    2. repec:oup:restud:v:84:y:2017:i:2:p:688-717. is not listed on IDEAS
    3. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2017. "Optimal Voting Rules," Review of Economic Studies, Oxford University Press, vol. 84(2), pages 688-717.
    4. Kwiek, Maksymilian, 2017. "Efficient voting with penalties," Games and Economic Behavior, Elsevier, vol. 104(C), pages 468-485.
    5. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Mechanism Design without Money," Working Papers tecipa-481, University of Toronto, Department of Economics.

    More about this item

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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