The Option to Wait in Collective Decisions

38 Pages Posted: 2 Jan 2008

See all articles by Matthias Messner

Matthias Messner

University of Cologne

Mattias Polborn

Vanderbilt University - College of Arts and Science - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 27, 2007

Abstract

We analyze a model in which voters learn over time their preferences regarding an irreversible social decision. Voters can either implement the project in the first period, or they can postpone the decision to the second period.

We analyze the effects of different majority rules. We show that individual first period voting behavior may become "less conservative"' under super majority rules, and that it is even possible that a project is implemented in the first period under a super majority rule that would not be implemented under simple majority rule.

From an ex-ante perspective, welfare is higher with a super majority rule rather than a simple majority rule. We also show that, in contrast to individual investment problems, society might be better off if the option to postpone the decision did not exist.

Keywords: Supermajority rules, learning, investment, option value

JEL Classification: D72, D81

Suggested Citation

Messner, Matthias and Polborn, Mattias K., The Option to Wait in Collective Decisions (December 27, 2007). Available at SSRN: https://ssrn.com/abstract=1078742 or http://dx.doi.org/10.2139/ssrn.1078742

Matthias Messner

University of Cologne ( email )

Albertus Magnus Platz
Cologne, NRW 50923
Germany

Mattias K. Polborn (Contact Author)

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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