Major decisions in business, economics, and politics often result from some collective choice process. Shareholders approve mergers, the Federal Open Market Committee sets interest rates, and citizens elect their president. Recent theoretical work has added much desired realism to models of collective decision making by including important features such as deliberation, abstention, and costly information acquisition. This proposal describes an array of experiments to test these newly proposed theories. The experiments are designed to be sensitive to possible biases in decision making (e.g., conformist behavior) and information processing (e.g., selective exposure). As such, the results will suggest ways to enrich the standard rational choice paradigm by admitting behavioral aspects into the analysis of collective choice problems.
This study is broadly divided into two parts. When information is exogenously determined the proposed experiments include several novel features, e.g., the comparison of a wide range of voting institutions (including majority and unanimity) in the presence of possibly conflicting preferences. In addition, this study evaluates the impact of deliberation and abstention on collective outcomes. The project also initiates a sequence of laboratory explorations when information is endogenously collected. This part will generate empirical insights about the interaction between institutions, the incentives to acquire information and the quality of the resulting collective decision process.
The intellectual merit of the proposed activity is manifold. The experiments are founded on theoretical models at the frontier of economic analysis of voting behavior, awaiting a thorough empirical investigation. Using a revealed preference approach allows the researchers to identify important behavioral elements germane to collective decision making. The empirical methods employed center around the Quantal Response Equilibrium, a novel framework allowing for some degree of "noise" in choices. This approach is being increasingly used to analyze experimental data and permits structural estimation of unobserved preferences and individual heterogeneity.
The broader impacts resulting from the proposed activity include the opportunity for improving collective choice procedures when participation and information collection is costly. The findings about how deliberation affects institutional outcomes could provide foundations for the political and philosophical theories of deliberative democracy. Furthermore, the experimental methodology used to study communication could spill over to other contexts such as auctions and mechanism design at large. The broader impacts include two additional contributions: the development of jVote, an open-source Java program for running voting experiments, and a sequence of mini-conferences to be held at Caltech. Web-based jVote will facilitate disseminating the experimental methodology to a wide audience of economists and political scientists, including those without access to a physical lab. The mini-conferences will serve to strengthen the dialogue between theory and empirics, and between economics and political science.
