Can Co-Owners Agree to Disagree? A Theoretical Examination of Voting Rules in Co-Ownerships
21 Pages Posted: 6 Oct 2003
Date Written: August 2003
We analyze the optimal voting rule for co-owners whose future debates are resolved by voting. Each co-owner independently forms an ex ante expectation regarding the likelihood of each member to favor any arbitrary future proposal. We examine the conditions under which a co-owner optimally opts for unanimous, special majority, simple majority, and minority voting rules. Interestingly, it follows from our analysis that co-owners with distinct characteristics may yet unanimously agree on the optimal voting rule. Among the other results: the optimal level of the voting rule is non-decreasing (non-increasing) in one's level of disutility from opposing (favoring) an accepted (a rejected) proposal. Also, while our results are generally in line with the predictions of Ellickson (1982) and the evidence of Barzel and Sass (1990), according to which heterogeneous (homogeneous) voters require (less than) a super majority voting rule, we show a possible exception to this generalization, under which heterogeneity, in some circumstances, may optimally lead to a minority voting rule. The results are applicable for groups such as general assemblies in apartment buildings, neighborhood councils, and others.
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