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

Danny Ben-Shahar () and Eyal Sulganik ()

The Journal of Real Estate Finance and Economics, 2005, vol. 31, issue 2, pages 207-223

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 is 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 exception 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. Copyright Springer Science + Business Media, Inc. 2005

Keywords: voting rule; majority; collective choice; constitution; corporate governance (search for similar items in EconPapers)
Date: 2005
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Persistent link: http://EconPapers.repec.org/RePEc:kap:jrefec:v:31:y:2005:i:2:p:207-223

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