Experimentation in Democratic Mechanisms

Volker Britz () and Hans Gersbach
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Volker Britz: ETH Zurich, Switzerland

No 14/199, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: We examine whether and how democratic procedures can achieve socially desirable public good provision in the presence of deep uncertainty about the benefits of the public good, i.e., when citizens are able to identify the distribution of benefits only if they aggregate their private information. Some members of the society, however, are harmed by socially desirable policies and try to manipulate information aggregation by misrepresenting their private information. We show that information can be aggregated and the socially desirable policy implemented under a new class of democratic mechanisms involving an experimentation group. Those mechanisms reflect the principles of liberal democracy, are prior{free, and involve a differential tax treatment of experimentation group members which motivates them to reveal their private information truthfully. Conversely, we show that standard democratic mechanisms with an arbitrary number of voting rounds but no experimentation do not generally lead to the socially desirable policy. Finally, we demonstrate how experimentation can be designed in such a way that differential tax treatments occur only off the equilibrium path.

Keywords: Democratic Mechanisms; Experimentation; Public Goods; Voting; Information Aggregation (search for similar items in EconPapers)
JEL-codes: D62 D72 H40 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-07
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-exp, nep-mic, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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