Inequality, Happiness and Relative Concerns: What Actually is their Relationship?

Kohei Kawamura ()
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Kohei Kawamura: http://homepages.ed.ac.uk/kkawamur/

ESE Discussion Papers from Edinburgh School of Economics, University of Edinburgh

Abstract: This paper studies information transmission between multiple agents with different preferences and a welfare maximizing decision maker who chooses the quality or quantity of a public good (e.g. provision of public health service; carbon emissions policy; pace of lectures in a classroom) that is consumed by all of them. Communication in such circumstances su¤ers from the agents. incentive to "exaggerate" their preferences relative to the average of the other agents, since the decision maker's reaction to each agent's message is weaker than in one-to-one communication. As the number of agents becomes larger the quality of information transmission diminishes. The use of binary messages (e.g. "yes" or "no") is shown to be a robust mode of communication when the main source of informational distortion is exaggeration.

Keywords: : Communication; Public Good Provision; Cheap Talk; Committee; Non-binding Referendum (search for similar items in EconPapers)
JEL-codes: D71 D82 H41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-hap and nep-hpe
Date: 2008-06-01
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Persistent link: http://EconPapers.repec.org/RePEc:edn:esedps:182

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