The Optimal Bargain between the Elite and the Majority: Party and Managerial Ideologies as Devices to Control Politicians and Managers

Wayne Eastman () and Deirdre Collier ()
Additional contact information
Wayne Eastman: Rutgers Business School—Newark and New Brunswick
Deirdre Collier: Fairleigh Dickinson University

Group Decision and Negotiation, 2012, vol. 21, issue 4, No 3, 475-494

Abstract: Abstract We investigate problems that arise in aligning office-seeking politicians with social welfare in situations where society (or the firm) is composed of groups of different sizes with different preferences. Similar alignment issues arise in corporations where management must respond to the demands of multiple constituencies. The problems arise because the agents have a suboptimal incentive to cater to majority preferences in situations with low participation costs and to elite minority preferences in situations with high participation costs. Our paper is mainly devoted to democratic politics, in which there is no group of residual claimants who are aligned to social welfare. In democratic politics, we claim that an efficient elite-majority bargain involves the creation of competing party ideologies that serve to check opportunism by majorities in low participation-cost scenarios and by elites in high participation-cost scenarios, and in doing so align politicians with social welfare. We suggest that in non-profit firms that also lack a residual claimant, an efficient elite-majority bargain involves a parallel creation of managerial ideologies, and that such managerial ideologies may also have utility in the for-profit firm as a supplementary device to foster alignment with firm value.

Keywords: Transaction costs; Allocative efficiency; Altruism; Models of political processes; Conflict; conflict resolution; and alliances; Asymmetric and private info; Corporate governance; Structure and performance of government; General legal; Corporate culture (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10726-010-9220-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:grdene:v:21:y:2012:i:4:d:10.1007_s10726-010-9220-8

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10726/PS2

DOI: 10.1007/s10726-010-9220-8

Access Statistics for this article

Group Decision and Negotiation is currently edited by Gregory E. Kersten

More articles in Group Decision and Negotiation from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().