Hierarchic contracting

We analyze the contracting structure in a moral hazard setting with several agents whereoutput is produced jointly and is the only contractible variable. Since the salary of each agentis a function of all agents efforts, a positive externality arises between them. This externalityis not internalised by a centralised structure where the principal contracts directly with eachagent. Instead, we find that a hierarchic structure (i.e. the delegation of "contracting rights"from the principal to the agents) internalises the externality by making agents "residualclaimants". Consequently, the second best situation can be improved upon just by changingthe contracting structure of the principal-agents relationship. The analysis is relevant to theliterature on decentralisation, outsourcing, subcontracting and intra-firm organization.Principal-multi-agent relationships, moral hazard, team production,decentralisation, hierarchies, contract design

Primaries: The Unifying Force

We present a formal model of intra-party politics to explain candidate selection within parties. We think of parties as heterogeneous groups of individuals who aim to implement a set of policies but who differ in their priorities. When party heterogeneity is too large, parties are in danger of splitting into smaller yet more homogeneous groups. In this context we argue that primaries can have a unifying role if the party elite cannot commit to policy concessions. Our model shows how alignment in the preferred policies of various factions within a party, the relative weight of each of these factions and the electoral system interact to create incentives for the adoption of primary elections. We discuss the existing empirical literature in the light of our theoretical predictions to provide a new, structured perspective on the adoption of primary elections.

Primaries: the unifying force

© 2015, Springer Science+Business Media New York. We present a formal model of intra-party politics to explain candidate selection within political parties. We think of parties as heterogeneous groups of individuals who aim to implement a set of policies but who differ in their priorities. When party heterogeneity is too great, parties are in danger of splitting into smaller yet more homogeneous political groups. In this context we argue that primaries can have a unifying role if the party elite cannot commit to policy concessions. Our model shows how three factors interact to create incentives for the adoption of primary elections, namely (1) the alignment in the preferred policies of various factions within a party, (2) the relative weight of each of these factions and (3) the electoral system. We discuss the existing empirical literature and demonstrate how existing studies can be improved in light of our theoretical predictions to provide a new, structured perspective on the adoption of primary elections.Hannes Mueller acknowledges financial support by the Juan de la Cierva programmePeer Reviewe

Conformity and individuals’ response to information about aggregate turnout

How do voters react to information about aggregate turnout? Do high turnout levels mobilize or discourage citizens to vote? We argue that it depends on individuals’ degree of conformity. We argue that in addition to the classic calculus of voting, conformist voters have an added incentive to ‘follow the pack’ and vote when turnout is high while abstain when turnout is low. We conduct two separate experiments, the first a survey experiment with a representative sample of the UK population and the second a lab experiment in Canada. Both studies confirm our hypothesis. These findings highlight the importance of taking individuals’ level of conformity into account when explaining their decision to vote or abstain

Electoral competition, control and learning

This article explores an agency model in which voters learn about both an incumbent and an opponent. They observe the incumbent’s policy record and update their beliefs about his opponent via a campaign. Although the former is relatively more informative, it can be costly for the voter to learn about the incumbent from her policy record. This is because policy reforms, which allow a voter to learn an incumbent’s ability, are risky and can leave the voter worse off. Then the voter may prefer the incumbent to take safer actions. The efficient level of reform – the one preferred by the voter – balances the value of learning with the expected policy costs/benefits. In a world where the opponent’s campaign is uninformative, reform can be too low due to the incumbent’s fear of failure. Or it can be too high: the incumbent may gamble on success. This article shows that the presence of an opponent who can reveal information via a campaign exacerbates these inefficiencies. An incumbent who anticipates the effect of an opponent’s campaign on voter beliefs is more likely to make inefficient policy choices. Further, such campaigns can lead to an overall welfare loss when they reveal little about the opponent’s ability and yet have an impact on the incumbent’s policy choice

Strategic agents in voting games

The first part of this Thesis asks whether we can devise voting rules that allow strategic voters to express the intensity of their preferences. As opposed to the classical voting system (one person - one decision - one vote), we first propose a new voting system where agents are endowed with a fixed number of votes that can be distributed freely between a predetermined number of issues that have to be approved or dismissed. Its novelty, and appeal, relies on allowing voters to express the intensity of their preferences in a simple manner. This voting system is optimal in a well-defined sense: in a setting with two voters, two issues and uniform independent priors, Qualitative Voting Pareto dominates Majority Rule and, moreover, achieves the only ex-ante (incentive compatible) optimal allocation. The result also holds true with three voters as long as the valuations towards the issues differ sufficiently. Experimental evidence is provided supporting equilibrium predictions and showing that Qualitative Voting is better able to replicate the efficient outcome than Majority Rule. More generally in a setting with an arbitrary number of voters and issues, we show: (1) that a mechanism is implementable only if it does not undertake interpersonal comparisons of utility; (2) the impossibility of implementing strategy-proof mechanisms that are sensitive to the voters' intensities of preferences and satisfy the unanimity property. The second part of the Thesis studies the interaction between politicians' strategic behaveiour and voters' turnout decision: politicians diverge to motivate citizens to vote and they adapt their policies to the most sensitive voters -thus less sensitive voters abstain on the grounds of perceiving politicians being too similar. Moreover, citizens in central/moderate positions abstain. We find support for our predictions using NES data: (1) a perceived low difference between the Democratic and Republican parties tends to decrease a citizen's probability to vote and (2) moderate citizens vote less

Pre-electoral coalitions and the distribution of political power

Pre-electoral coalitions (PECs) may increase parties’ chances of winning an election, but they may also distort electoral results and policies away from citizens’ preferences. To shed light on how PECs shape post-electoral power distribution, we study the causes and consequences of PECs in Finland where elections use an open-list proportional representation system, and parties may form joint lists. We present descriptive evidence showing that PECs are more common between parties of equal size and similar ideology, and when elections are more disproportional or involve more parties. Using difference-in-differences and density discontinuity designs, we illustrate that voters punish coalescing parties and target personal votes strategically within the coalitions, and that PECs are formed with the particular purpose of influencing the distribution of power. PECs increase small parties’ chances of acquiring leadership positions, lead to more dispersed seat distributions, and sometimes prevent absolute majorities. They can thus enable a broader representation of citizens’ policy preferences

The perverse consequences of policy restrictions in the presence of asymmetric information

Institutions have the power to limit a government’s policy options. Policy restrictions are often used as solutions to coordination failures or time inconsistency problems. However, policy constraints can have significant drawbacks and these disadvantages have, to date, been overlooked in the literature. When institutional constraints tie a government’s hands, citizens will have less incentive to become informed about politics and participate in collective decision-making. This is because policy restrictions lower the private returns of political information. A fiscal policy restriction, for example, may decrease redistribution by lowering a poorer voters’ acquisition of political information. We illustrate our theoretical findings with numerical simulations and find that in one in three cases these policy restrictions make poorer voters worse off

Trusting the trust game: an external validity analysis with a UK representative sample

Using a nationally representative sample of 1052 respondents from the United Kingdom, we systematically tested the associations between the experimental trust game and a range of popular self-reported measures for trust, such as the General Social Survey (GSS) and the Rosenberg scale for self-reported trust. We find that, in our UK representative sample, the experimental trust game significantly and positively predicts generalised self-reported trust in the GSS. This association is robust across a number of alternative empirical specifications, which account for multiple hypotheses corrections and control for other social preferences as measured by the dictator game and the public good game, as well as for a broad range of individual characteristics, such as gender, age, education, and personal income. We discuss how these results generalise to nationally representative samples from six other Organisation for Economic Co-operation and Development (OECD) countries (France, Germany, Italy, Korea, Slovenia, and the US)