To dissent or not to dissent? Informative dissent and parliamentary governance

Legislative dissent has detrimental effects for both party and legislator, i.e., legislators depend on their party label for re-election, which value in turn depends in part on the party’s reputation of cohesiveness. Commonly dissent has been attributed to “extreme” preferences. I provide an informational rationale for dissent. Costly dissent allows the legislator to credibly signal information about his constituency’s preferences to the Cabinet. As a result the Cabinet can better calibrate its policies with the electorate’s preferences. Dissent is shown to depend on policy preferences as well a the legislators’ electoral strength, electoral volatility, and the cost of dissent. Finally, the results suggests that parties may sometimes benefit from tolerating some level of dissent. I am grateful to Christopher Kam, Randall Calvert, John Duggan, Mark Fey, Eduardo Leoni, Sona Golder, and the anonymous referees for their helpful comments and suggestions. I also wish to thank the Political Institutions and Public Choice Program at Michigan State University for its support. All remaining errors are mine.     

Self-organized criticality in a herd behavior model of financial markets

This paper explains the fat-tail distribution of asset transaction volumes and prices by a model of rational herd behavior of traders. Each trader decides whether to buy an asset by observing private information and other traders’ actions. A trader’s buying action reveals his positive private information and affects the other traders’ beliefs in favor of buying, leading to strategic complementarity. A power-law distribution emerges for the number of buying actions in a static Nash equilibrium. This model provides an economic reason as to why the stock market has to exhibit a criticality in the connectivity of the traders’ actions. I am benefited by comments from the seminar participants at University of Tokyo and the Econophysics Colloquium 2006 at International Christian University, the editors of the special issue, and particularly an anonymous referee.     

Sounding the alarm: Impact of political instability on growth and fiscal health of the Indian economy

A noticeable change evident in the Indian political scenario since the eighties has been a sharp rise in the frequency with which governments have been ousted out of power. This augurs well for Indian democracy as it reflects a ‘political awakening’. Such changes in government, after an election reflect ‘orderly’: transfer of power and are inherent to the democratic form of governance. However, a close scrutiny of the political scenario at the state government level shows that there have been very frequent changes in government between elections. A high frequency of changes in government could be expected to result in frequent reversals or modifications in policy decisions and have a destabilizing effect on the economy. The present study is an empirical exercise undertaken at the level of state governments. It makes a first attempt to examine the impact of political instability on growth and on the fiscal health of the Indian economy. Received: September 25, 2000/Accepted: January 11, 2002 RID="*" ID="*" Sincere thanks to Professors Ajit Karnik and Abhay Pethe for their comments and suggestions. I would also like to thank the two anonymous referees for their insightful comments and suggestions, which have been of great help. The usual disclaimer applies.     

Mechanism design for a solution to the tragedy of commons

We consider the problem of the tragedy of commons in cooperative production economies, and propose a mechanism to resolve this tragedy, taking into account that the coordinator cannot perfectly monitor each agent’s labor skill and each agent may have an incentive to overstate as well as understate his own skill. Even in such a situation, the mechanism implements the proportional solution (Roemer in Soc Philos Policy 6:74–92, 1989 and Roemer and Silvestre in J Econ Theory 59:426–444, 1993) in Nash and strong equilibria when it is played as a normal form game. Moreover, the mechanism triply implements the solution in Nash, subgame-perfect, and strong equilibria when it is played as a two-stage extensive form game. We are greatly thankful to Semi Koray, William Thomson, and an anonymous referee of this journal for their concrete and helpful comments on improving the paper. An earlier version of this paper was presented at the annual meeting of the Japanese Economic Association held at Hitotsubashi University in October 2001 and at the Conference on Economic Design held at NYU in July 2002. We are grateful to Takehiko Yamato for his useful comments in the former conference. We are also thankful to Tatsuyoshi Saijo, Kotaro Suzumura, and Yoshikatsu Tatamitani for their kind comments.     

Self-selection bias and cost-of-living estimates

Due to continued interest in geographic living-cost differentials, some researchers have used data from the ACCRA Cost of Living Index. This paper explores further the potential for using ACCRA data for cost-of-living research. In particular, it investigates the possibility of self-selection bias affecting OLS estimates using ACCRA data. The findings indicate that self-selection bias is a concern that researchers using ACCRA data should be aware of. Results using Heckman’s two-step procedure to estimate a cost-of-living model indicate promise for using ACCRA data to update and expand upon previous cost-of-living research. The author wishes to acknowledge Keith Ihlanfeldt and Cynthia Rogers for constructive comments on an earlier version of this paper presented at the 35th Meeting of the Southern Regional Science Association and also wishes to thank the two anonymous referees for their suggestions on improving the paper.     

The relative importance of campaign expenditures: An application of production theory

In an election campaign a politician attempts to combine the resources at his disposal so as to maximize the percent of the votes he receives. This behavior is consistent with an economic model of production where the producer combines inputs in order to maximize output. In this paper the concept of an election campaign as a production process is applied to elections to the U.S. House of Representatives. The three inputs were campaign expenditures, years of tenure in office, and the percent of registered voters in candidate's party. Cobb-Douglas and CES versions of the production function are estimated. Each estimation indicated that the marginal productivity of campaign expenditures was very low. Further, the CES estimation indicated low elasticity of substitution between campaign expenditures and other inputs. This means that it is difficult for a candidate who faces a disadvantage—either because his opponent is an incumbent with several years experience, or because he belongs to a minority party—to overcome this disadvantage by simply spending more money.     

Keeping Work in Perspective: Work–Nonwork Considerations and Applicant Decision Making

The work–nonwork supportiveness of an organization may influence applicant decision making among young applicants. This possibility was tested using a phased narrowing decision making task and three organizational attributes (salary, number of work–nonwork supportive policies/benefits and their related culture supportiveness). Data gathered from a sample of 110 graduating college business majors partially supported the hypotheses (p < 0.05), revealing a dynamic influence of the organizational attributes across decision making stages and a differential impact of the attributes depending on their framing as family-friendly or life-friendly. Salary was especially important in initial screening of organizational options, and the organizational culture support of work–nonwork challenges was increasingly influential as the final choice was formed. Implications for young applicant attraction are discussed. The research presented here (a portion of the author’s master’s thesis at Bowling Green State University) was presented at the 2006 Annual Conference of the Society for Industrial and Organizational Psychology in Dallas, TX. Thanks go to Dr. Steve M. Jex, Dr. Scott Highhouse, and Dr. Cathy Stein for their assistance in the development of this study. Thanks are also owed to Dr. Michael Doherty for his thoughtful comments on an earlier draft.     

The concept study of Servqual method’s gap

The methodology of conduct, presented in this publication, allows conducting the study of clients’ satisfaction of services in a complex manner and at the same time, it allows getting to know all problems appearing in the process of their provision. Gap no 5 expresses a general client’s perception of services and allow defining his satisfaction. Gap 4 allows defining in what range the organization provides clients with false and distorted information in its promotion and advertising materials, which in consequence influence on their satisfaction. The result from gap no 4 can be used when planning promotion campaign. Gap no 2 and 3 allow defining if the organization is realizing the planned strategy of quality. It allows defining which employees provide services of a low quality and then by means of the application the appropriate motivation tools it allow to cut it out. Finally, gap no 1 which allow defining problems connected with marketing communication. It allows finding client’s needs which organization does not know and which should be included in its strategy.     

Ambiguity in election games

We construct a model in which the ambiguity of candidates allows them to increase the number of voters to whom they appeal. We focus our analysis on two points that are central to obtain ambiguity in equilibrium: restrictions on the beliefs that candidates can induce in voters, and intensity of voters' preferences. The first is necessary for a pure strategy equilibrium to exist, while the second is necessary for ambiguity in equilibrium when there exists a Condorcet winner in the set of pure alternatives (e.g. the spatial model of electoral competition), and when candidates' only objective is to win the election. In this last case, an ambiguous candidate may offer voters with different preferences the hope that their most preferred alternative will be implemented. We also show that if there are sufficiently many candidates or parties, ambiguity will not be possible in equilibrium, but a larger set of possible policies increases the chance that at least one candidate will choose to be ambiguous in equilibrium. We would like to thank Alberto Alesina, Antonio Cabrales, Steve Coate, Olivier Compte, Tim Feddersen, Itzhak Gilboa, Joe Harrington, Michel Le Breton, Alessandro Lizzeri, George Mailath, Steve Matthews, Steve Morris, Ignacio Ortuno, Tom Palfrey, Larry Samuelson, Murat Sertel, Fernando Vega, Eyal Winter and an anonymous referee for helpful comments. The first author acknowledges financial support from DGICYT-PB 95-0983. This work was done while the first author was visiting the Center in Political Economy at Washington University, and visiting the Center for Basic Research in the Social Sciences at Harvard University. Their hospitality is gratefully acknowledged. The support of the second author's research by the National Science Foundation is also gratefully acknowledged.     

Implementation of social optimum in oligopoly

This paper presents a decentralized mechanism implementing socially optimal output choices by non-cooperatively acting oligopolists. A decentralized mechanism is a vector of balanced transfers among firms determined as a function of firms’ output choices. The mechanism is devised by a regulator with a full knowledge of demand and without any knowledge of the firms’ cost functions. Restricting the set of admissible demand and cost functions such that the firms always have an incentive to produce, it turns out that the socially optimal solution is implementable insofar as the demand function is a polynomial of at most (n−1)th degree, n being the number of firms in the industry. The author is indebted to a referee and an associate editor for their helpful comments.     

A mechanism implementing the proportional solution

We consider the problem of a commonly owned technology which transforms a single input into a single output. We are interested in implementing a social choice rule called theproportional solution. We introduce a mechanism which implements the proportional solution in Nash, strong (Nash) and undominated Nash equilibria. In the mechanism each agent announces only two numbers which can be interpreted as the total output and her share of the total input-output combination. This paper was originally titled "Doubly implementing the proportional solution." I would like to thank my advisor William Thomson for his detailed comments and suggestions. I would also like to thank Jeffrey Banks and Sung-Whee Shin for their comments. Two anonymous referees and an editor’s comments improved this paper substantially.     

On the performance of voting systems in spatial voting simulations

We study the performance of voting systems in terms of minimizing the overall social disutility of making a collective choice in an univariate voting space with ideological voting and perfect information. In order to obtain a distribution of the performance indicator for each of the 12 systems chosen for this study—Baldwin’s Method, Black’s Method, The Borda Count, Bucklin’s Grand Junction System, Coombs’ Method, Dodgson’s System, Instant Run-Off Voting, Plurality, Simpson’s MinMax, Tideman’s Ranked Pairs, Schulze’s Beatpath Method, and Two-Round Majority—we simulate elections using an Agent-Based Computational approach under several different distributions for voters and candidates positioning, with up to 15 available candidates. At each iteration, voters generate complete and strict ordinal utility functions over the set of available candidates, based on which each voting system computes a winner. We define the performance of a system in terms of its capability of choosing among the available candidates the one that minimizes aggregate voter disutility. As expected, the results show an overall dominance of Condorcet completion methods over the traditional and more widely used voting systems, regardless of the distributions of voter and candidate positions.     

Strong measures of group coherence and the probability that a pairwise majority rule winner exists

A Pairwise Majority Rule Winner (PMRW) exists for a voting situation if some candidate can defeat each of the remaining candidates by Pairwise Majority Rule. The PMRW would be very appropriate for selection as the winner of an election, but it is well known that such a candidate does not always exist. This paper concludes a series of studies regarding the probability that a PMRW should be expected to exist in three-candidate elections, by introducing the notion of a strong measures of mutually coherent group preferences. In order for voting situations to be reasonably expected to fail to have a PMRW in a three-candidate election, voters’ preferences must be generated in an environment that is far removed from the situation in which there is a strong-overall-unifying candidate. So far removed, that it is extremely unlikely that a PMRW will not exist in voting situations with large electorates for a small number of candidates.     

“Rulers ruled by women”: an economic analysis of the rise and fall of women’s rights in ancient Sparta

Until modern times, most women possessed relatively few formal rights. The women of ancient Sparta were a striking exception. Although they could not vote, Spartan women reportedly owned 40 percent of Sparta’s agricultural land, and enjoyed other rights that were equally extraordinary. We offer a simple economic explanation for the Spartan anomaly. The defining moment for Sparta was its conquest of a neighboring land and people, which fundamentally changed the marginal products of Spartan men’s and Spartan women’s labor. To exploit the potential gains from a reallocation of labor—specifically, to provide the appropriate incentives and the proper human capital formation—men granted women property (and other) rights. Consistent with our explanation for the rise of women’s rights, when Sparta lost the conquered land several centuries later, the rights for women disappeared. Two conclusions emerge that may help explain why women’s rights have been so rare for most of history. First, in contrast to the historical norm, the optimal (from the men’s perspective) division of labor among Spartans involved women in work that was not easily monitored by men. Second, the rights held by Spartan women may have been part of an unstable equilibrium, which contained the seeds of its own destruction. For helpful comments, we thank Yoram Barzel, Paul Cartledge, Beth Davenport, Dino Falaschetti, Nancy Folbre, Barbara Hanssen, Ron Johnson, Lea Kosnik, Francine Lafontaine, Dean Lueck, Sarah Pomeroy, Mark Ramseyer, Randy Rucker, Wendy Stock, Chris Stoddard, Werner Troesken, Doug Young, and seminar participants at Colby College, George Mason University, Montana State University, the Property and Environment Research Center, the University of Virginia, Wabash College, the 2006 meetings of the Economic History Association, and the 2007 meetings of the American Economic Association.     

Efficiency in Banking: Empirical Evidence from the Czech Republic

The paper examines the cost efficiency of the Czech-banking system in the 1990s by applying the distribution free approach model. Reported results indicate that foreign banks were on average more efficient than the other banks, although their efficiency was comparable with the ‘good’ small banks’ efficiency in early years of their operation. Based on the estimated results it is argued that early privatisation of state-owned commercial banks and more liberal policy towards foreign banks in the early stage of transition would have enhanced the efficiency in the banking system. Anita Taci - The views and opinions are those of the author and not necessarily those of the EBRD.     

Elections and strategic positioning games

We formalize the interplay between expected voting behavior and strategic positioning behavior of candidates as a common agency problem in which the candidates (i.e., the principals) compete for voters (i.e., agents) via the issues they choose and the positions they take. A political situation is defined as a feasible combination of candidate positions and expected political payoffs to the candidates. Taking this approach, we are led naturally to a particular formalization of the candidates' positioning game, called a political situation game. Within the context of this game, we define the notion of farsighted stability (introduced in an abstract setting by Chwe 1994) and apply Chwe's result to obtain existence of farsightedly stable outcomes. We compute the farsightedly stable sets for several examples of political situations games, with outcomes that conform to real-world observations.Received: 18 May 2001, Accepted: 22 January 2002, JEL Classification: C7, D7, D8Myrna H. Wooders: http://www.warwick.ac.uk/fac/soc/Economics/wooders/An earlier version of this paper was completed while the first author was visiting the Department of Economics, University of Exeter. The first author gratefully acknowledges Exeter's support and hospitality. Similarly, the second author gratefully acknowledges the support and hospitality of the Centre for Operations Research and Econometrics (CORE) of the University of Louvain-la-Neuve, Belgium and of the University of Cergy-Pontoise, France. Both authors are indebted to Amrita Dhillon, John Duggan and Gilat Levy for helpful comments about references. Both authors thank an anonymous referee for helpful comments.     

The Obama effect

Many observers argued that Barack Obama’s candidacy in the U.S. presidential election of 2008 benefited from the financial crisis and recessionary economic conditions which voters blamed on the Republican administration. However, an empirical examination of stock price and public opinion data indicates that improvements in Obama’s electoral prospects led stock price declines and that gains by Obama were more likely to be followed by falling stock prices than by rising prices. This evidence suggests that the poor performance of the stock market in the days leading up to Obama’s victory was partly caused by, rather than causing, Obama’s success.

Life-cycle hypothesis, propensities to save, and demand for financial assets

In recent decades, the United States has not only experienced great economic changes in the financial markets but also undergone tremendous social and demographic transformations. Based on the life-cycle theory of consumption and saving, Keynes’s concept of marginal propensity to save, and Friedman’s theory of asset demand, this study shows that changes in sociodemographic conditions have significant impacts on the saving behavior of individuals in the financial markets. Findings indicate that the amounts of savings held in financial institutions for transactions, precautionary, and speculative motives differ substantially among individuals with divergent socio-economic characteristics. Regression results also show that individuals with different demographic backgrounds differ greatly in their propensities to save and hold financial assest with different degrees of liquidity and risk. The author is grateful to an anonymous referee for many valuable comments and to Thomas Palumbo, Michael Davern, Stephanie Shipp, and Arthur Kennickell for their suggestions. This paper reports the results of research and analysis undertaken by Census Bureau staff. It has undergone a more limited review than offical Census Bureau publications. This report is released to inform interested parties of research and to encourage discussion.     

Bargaining and exclusivity in a borrower–lender relationship

This paper presents a stylized model of a borrower–lender relationship where funds are gradually invested in a project with uncertain return. We show that an exclusive financing relationship arises endogenously in equilibrium due to initial lender’s superior information on the project’s progress. The analysis also identifies a novel distortionary effect of exclusivity and the consequent loss of future rents on the ex-ante choices of the borrower. When she chooses the amount of funds to be initially invested in the project, the borrower chooses to overinvest making the future rent extraction by the initial lender as costly as possible. We would like to thank Alberto Bisin, Andrew Chen, Boyan Jovanovic, Hideo Konishi, David Mauer, Efe Ok, Mike Riordan, Charles A. Wilson, and seminar participants at Society of Economic Design 2002 meetings in New York and Southern Methodist University for helpful comments. The usual disclaimer applies.     

The generalized Stackelberg equilibrium of the all-pay auction with complete information

We characterize the equilibrium of the all-pay auction with general convex cost of effort and sequential effort choices. We consider a set of n players who are arbitrarily partitioned into a group of players who choose their efforts ‘early’ and a group of players who choose ‘late’. Only the player with the lowest cost of effort has a positive payoff in any equilibrium. This payoff depends on his own timing vis-a-vis the timing of others. We also show that the choice of timing can be endogenized, in which case the strongest player typically chooses ‘late’, whereas all other players are indifferent with respect to their choice of timing. In the most prominent equilibrium the player with the lowest cost of effort wins the auction at zero aggregate cost. We thank Dan Kovenock and Luis C. Corchón for discussion and helpful comments. The usual caveat applies. Wolfgang Leininger likes to express his gratitude to Wissenschaftszentrum Berlin (WZB) for its generous hospitality and financial support.