Costly participation and heterogeneous preferences in informational committees

Hongbin Cai ()

RAND Journal of Economics, 2009, vol. 40, issue 1, 173-189

Abstract: Informational committees are groups of people who are designated to gather information. This article develops a simple model of committee size based on costly participation and preference heterogeneity. In a setting in which the information structure and policy preferences are both represented by normal random variables, I characterize an equilibrium under the mean decision rule and derive the optimal committee size. I show that when effort costs are sufficiently high, preference heterogeneity can provide members additional incentives to gather information, and thus the optimal committee size and the principal's expected payoff can increase in the heterogeneity of committee members' policy preferences.

Date: 2009
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https://doi.org/10.1111/j.1756-2171.2008.00060.x

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