PARETO EFFICIENCY AND WEIGHTED MAJORITY RULES

Yaron Azrieli and Semin Kim

International Economic Review, 2014, vol. 55, issue 4, 1067-1088

Abstract: We consider the design of decision rules in an environment with two alternatives, independent private values and no monetary transfers. The utilitarian rule subject to incentive compatibility constraints is a weighted majority rule, where agents' weights correspond to expected gains given that their favorite alternative is chosen. It is shown that a rule is interim incentive efficient if and only if it is a weighted majority rule, and we characterize those weighted majority rules that are ex ante incentive efficient. We also discuss efficiency in the class of anonymous mechanisms and the stability of weighted majority rules.

Date: 2014
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