Working Paper: CEPR ID: DP3003
Authors: Hans Peter Grüner; Alexandra Kiel
Abstract: Many collective decision problems have the common feature that individuals' desired outcomes are correlated but not identical. This Paper studies collective decisions with private information about these desired policies. Each agent holds private information that mainly concerns their own bliss point, but this private information also affects all other agents' bliss points. We concentrate on two specific mechanisms, the mean and the median mechanism. We establish existence of two symmetric Bayesian Nash equilibria of the corresponding game and compare the performance of the mechanisms for different degrees of interdependencies. Applications of our framework include the assignment of voting rights in the council of the European Central Bank, the design of decision processes in teams, firms and international organizations.
Keywords: asymmetric information; collective decisions; interdependent valuations
JEL Codes: D78; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| individual preferences (influenced by private information) (D89) | collective decisions (D70) |
| median mechanism (C51) | better outcomes than mean mechanism (when individual preferences are weakly interdependent) (D79) |
| degree of interdependencies (C69) | effectiveness of each mechanism (D47) |
| median mechanism (C51) | collective decision reflects majority rule (D70) |
| mean mechanism (C51) | less optimal collective decisions (when preferences are strongly interdependent) (D70) |
| spillover effects (F69) | robustness of median mechanism (C22) |