Intellectual merits: This research project studies strategic voting and committee bargaining mechanisms under conditions of incomplete information from both theoretical and experimental perspectives. Many questions remain unresolved about the general theoretical problem of designing optimal voting mechanisms to efficiently aggregate preferences and information, without explicit side payments, and also about actual behavior under such mechanisms. Theoretically, there are questions of the relative performance of different voting mechanisms, where performance can be evaluated relative to several different objectives, including economic efficiency, informational efficiency, and equity. The research approaches voting behavior from a mechanism design perspective, and compares the performance of different voting mechanisms in different kinds of environments. The research encompasses five projects in political economy. Three of these projects will explore promising extensions of the research initiated under the current grant. These are: (1) The Dynamic Political Economy of Public Infrastructure; (2) Strategic Voting and Information Acquisition in Committees; and (3) Vote Trading in Committees. The first follows naturally from the dynamic political bargaining model studied under the current grant. Bargaining agreements evolve over time, with past bargaining outcomes setting the table for current and future rounds of bargaining. We extend that pure private good model to incorporate a dimension of durable public goods, or "public infrastructure." We propose to compare the effects of different voting rules and government organization on the bargaining process, especially with respect to the effects on efficient investment in public infrastructure. The second project evolved from experimental studies conducted by the PI and collaborators on the "swing voter's curse," a phenomenon whereby less informed voters have incentives to either abstain or even vote strategically against the outcome they would choose if the decision they would choose on their own. The extension endogenizes the acquisition of information by voters. The third part of the proposed research involves studying new voting mechanisms that allow voters to express preference intensities over a multiple decisions across different issue dimensions. We apply competitive equilibrium analysis to this kind of environment and propose a new equilibrium concept with vote trading, called "ex ante exchange equilibrium." We then study the predictive power of this model by setting up controlled laboratory "vote markets." The emphasis is on the comparative statics predictions and the efficiency properties. The two additional projects are: (4) The Emergence of Efficiency in Dynamic Coordination Problems; and (5) Dynamic Cursed Equilibrium with an Application to Sophisticated Voting in Dynamic Agendas with Incomplete Information. The analysis of the data will explore these extended models of limited rationality to help explain where and why the theory seems to be adequate and where and why it misses. Project (4) characterizes efficient dynamic equilibria subject to constraints imposed by the symmetry structure of the coordination game. We will design and conduct experiments that look at the effects of the number of players in the group and also the effects of the symmetry structure of the game. Project (5) explores a new specification of limited strategic sophistication that extends the cursed equilibrium to extensive form games. It extends the cursed equilibrium logic from traditional "mixed strategies" (strategic form) to behavioral strategies. The original formulation was done in strategic form and so the idea of cursed equilibrium did not have bite in many sequential contexts. We apply this to a variety of sequential games, in particular sequential voting with incomplete information.
Broader impacts: In addition to basic research, the proposed research has an education component, by training graduate students in experimental economics and economic theory. The ultimate goal of the research is to better understand how procedures in commitees affect decision making and with and eye to understanding how these procedures may be modified to improve decision making and overcome obstacles such as conflicting preferences and beliefs, and asymmetric information. This better understanding in the long run can improve performance of organizations and policy-making institutions. The performance of voting procedures are evaluated according to traditional economic welfare criteria, informational efficiency, and equity. There is extensive software development proposed under the grant. This software may be used freely by other researchers in experimental economics and will be publicly available as open source code.
The research conducted under this NSF grant developed important extensions and new approaches in theoretical and experimental economics and political science. The underlying framework for the research is grounded in a combination of game theory and general equilibrium theory. Graduate students and post-doctoral scholars participated in the grant, generating significant educational and training benefits. There was a significant software development component to the research, with potential widespread application in economics, political science, and game theory. The research added to the base of knowledge in game theory, political science, and economics by publishing the findings, results, and techniques in leading academic journals. We summarize intellectual and scientific merits of the project outcomes below, by briefly explaining the findings from different components of the project. The first component was a theoretical and experimental study of committee bargaining, as influenced by the committee voting procedures. The first paper developed a theoretical model of dynamic bargaining with an evolving status quo, and also conducted an experiment to study the behavior in these environments. The first publication of this research analyzed the game theoretic equilibria of a long-horizon dynamic game, and conducted an experiment to examine hypotheses generated by the theory. We report several findings. Status quo outcomes have strong inertia. There are significant treatment effects that are consistent with equilibrium. This component then evolved into a more extensive second phase of research on the dynamic political economy of public infrastructure, by introducing dynamic investment in a durable public good (e.g., defense, bridges, roads, etc.) into a long horizon bargaining model. This new model thus explores the political economy forces of bargaining and voting on the accumulation of public capital. The inter-temporal nature of public capital accumulation creates a dynamic free rider problem that is distinct from the standard free rider problem identified in the older literature on static public good provision. In particular, there may be incentives to invest less today in order to shift the cost burden to others in the future. The first paper of this second phase compares the effect of the voting rule on the time path of consumption, investment and public capital accumulation. We show that as the required size of a winning coalition increases, the equilibrium investment path becomes more efficient. We conduct a laboratory experiment that shows broad support for this effect. Three related papers have subsequently been written. One of these is highly theoretical and fully characterizes the symmetric equilibria of the dynamic game if the mechanism for investment is completely decentralized. A key result is that equilibrium public capital accumulation is more efficient if investments are irreversible than if they are reversible. A second one reports results from experiments based on the theory paper. The main prediction about the effect of investment reversibility is supported in the data. The third related paper reports the results of an experiment designed to measure explicitly the efficiency losses attributable to the dynamic free rider problem. As a second component of the project, several studies by the PI and collaborators look at a variety of questions about voting procedures and voting rules. These include questions about the difference between sequential voting procedures and simultaneous voting procedures, and also questions about participation in elections and voter abstention. We are able to obtain definitive theoretical results relating to information aggregation by voting, efficiency, vote balancing, margins of victory, bandwagon effects, the likelihood of underdog upsets, and voter turnout. Laboratory experiments are used to test the basic predictions of these models. The results provide some support the equilibrium predictions provided by non-cooperative game theory and also provide insights on the larger theoretical and empirical literature on pivotal voter models. A third component of the research explored alternative mechanisms that combine voting and exchange institutions. This theoretical approach was to extend in a novel way the standard theory of general competitive equilibrium to the nonstandard case of markets for votes. We find that centralized vote trading, coordinated by party leaders, which is modeled analogously to bargaining games with incomplete information, generates significant efficiency improvements, while a decentralized market without coordination results in too much trading and virtually no overall efficiency gain. A fourth component developed new theoretical results on common-value bargaining with two-sided asymmetric information, and reports results from experiments designed to investigate the extent to which winner's curse and speculative behavior is exhibited in these kinds of setting. Several anomalies related to the winners curse were observed in these environments, which included crisis bargaining and exchange institutions. The research also explored winners curse phenomena in auctions. In a related common value setting, the research studied a dynamic asset pricing model with public information flows. We find significant overpricing of the asset and show how and why this is consistent with an equilibrium asset pricing model with heterogeneous beliefs.
