Can Co-Owners Agree to Disagree? A Theoretical Examination of Voting Rules in Co-Ownerships

Posted: 14 Jan 2005

See all articles by Danny Ben-Shahar

Danny Ben-Shahar

Tel Aviv University

Eyal Sulganik

Interdisciplinary Center (IDC) Herzliyah - Adelson School of Entrepreneuship

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Abstract

Does there exist a voting rule to be, for example, inserted into the constitution of a newly constructed apartment building, which is likely to attract the greatest number of consumers? We analyze this and other questions within a framework in which co-owners resolve future debates by voting. We examine the conditions under which a co-owner optimally opts for unanimous, special majority, simple majority, and minority voting rules. The main innovation of the analysis it that co-owners with distinct characteristics may yet unanimously agree on the optimal voting rule. Among the other results are that 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 excpetion to this generalization: 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.

Keywords: Voting rule, majority, collective choice, constitution, corporate governance

Suggested Citation

Ben-Shahar, Danny and Sulganik, Eyal, Can Co-Owners Agree to Disagree? A Theoretical Examination of Voting Rules in Co-Ownerships. Journal of Real Estate Finance and Economics, Vol. 31, No. 2. Available at SSRN: https://ssrn.com/abstract=648689

Danny Ben-Shahar (Contact Author)

Tel Aviv University ( email )

Tel Aviv
Israel

Eyal Sulganik

Interdisciplinary Center (IDC) Herzliyah - Adelson School of Entrepreneuship ( email )

P.O. Box 167
Herzliya, 46150
Israel
972-9-9572307 (Phone)
972-9-9568605 (Fax)

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