A generalization of Condorcet’s Jury Theorem to weighted voting games with many small voters

We extend Condorcet’s Jury Theorem (Essai sur l’application de l’analyse à la probabilité des décisions rendues à la pluralité des voix. De l’imprimerie royale, 1785) to weighted voting games with voters of two kinds: a fixed (possibly empty) set of ‘major’ voters with fixed weights, and an ever-increasing number of ‘minor’ voters, whose total weight is also fixed, but where each individual’s weight becomes negligible. As our main result, we obtain the limiting probability that the jury will arrive at the correct decision as a function of the competence of the few major players. As in Condorcet’s result the quota q = 1/2 is found to play a prominent role. I wish to thank Maurice Koster, Moshé Machover, Guillermo Owen and two anonymous referees for helpful comments.     

Background Risk and the Performance of Insurance Markets under Adverse Selection

Background risk can influence the performance of insurance markets that must deal with adverse selection when applicants are risk vulnerable, since they are more averse to bearing the insurable risk as a result of their exposures to background risk. We show that background risk always results in a lower deductible for the incentive constrained contract, and that a broader range of markets attains the stable sequential equilibrium cross-subsidized pair of separating contracts. We conclude that background risk always improves the performance of markets for coverage against (insurable) foreground risks that must deal with adverse selection. We also find, however, that these improvements are never sufficient to offset the cost to insureds of bearing the background risk.     

FOCUS: Ethical Business: Thinking Thoughts and Facilitating Processes

Doing business ethics and conducting ethical business has to be much more than conducting a rational enquiry. Much also depends on the motivation of individuals and how a positive moral vision of business can unite intellectual and affective approaches to the conduct of business. The author is a lecturer in Philosophy at Warwick University, Coventry CV4 7AL, and a Research Associate at the Local Government Centre at Warwick Business School. He is also an independent organisation development consultant specialising in helping organisations develop their learning processes and value-based forms of leadership.     

Changing Risk Premia: Evidence from a Small Open Economy

Little is known about the differences in the relation between risk and return in large economies such as the U.S. compared with smaller, less studied, markets. In this paper, Sweden serves as a representative for small open economies. The price of risk on the Swedish stock market is estimated using a conditional asset pricing model that allows for time variation in the risk. Four different GARCH-M models are used in the econometric specification. The estimates of the price of risk are invariably positive and significant, and we conclude that there exists a time-varying risk premium in the Swedish stock market. Our results show that there are small differences in the preferences towards risk of representative investors in small and large economies.     

Information Disclosure to Employees and Rational Expectations: a Game-Theoretical Perspective: a Comment

In this comment we identify the key features of the Frantz and Walker (1997) game theoretic model that drive the non-disclosure equilibrium result in their paper. We argue that, although technically correct, their model fails to capture certain aspects of real-world wage bargaining that will be important in determining optimal disclosure strategies in practice. However, Frantz and Walker's paper illustrates the potential of analytical techniques to contribute to the employee disclosure debate.