Collective Decision Making at Universität Magdeburg

Flashcards and summaries for Collective Decision Making at the Universität Magdeburg

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Study with flashcards and summaries for the course Collective Decision Making at the Universität Magdeburg

Exemplary flashcards for Collective Decision Making at the Universität Magdeburg on StudySmarter:

Positive analysis

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Normative analsis

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Positivistic/"naturalistic" fallacy

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Normative fallacy

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When can an individuals preferences be represented by a numerical index ("utility") 

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Transitivity

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Weak Preference vs Strong preference

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Transaction cost examples

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Institution's means to overcome the problems with markets

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Organizational cost

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Four dimensions of contractual relations

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How to check for a Condorcet Voting Paradox

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Exemplary flashcards for Collective Decision Making at the Universität Magdeburg on StudySmarter:

Collective Decision Making

Positive analysis

Derivation/Prediction of outcomes, explanation of behavior --> equilibrium

Collective Decision Making

Normative analsis

Evaluate institutional arrangements and derive recommendations -> welfare, distribution, profit, consumer benefit

Collective Decision Making

Positivistic/"naturalistic" fallacy

Something is considered "good" only because it exists

Collective Decision Making

Normative fallacy

something is predicted only because it is desirable

Collective Decision Making

When can an individuals preferences be represented by a numerical index ("utility") 

If the preference order is transitive, complete, reflexive, antisymmetric

Collective Decision Making

Transitivity

Transitiv if: A wins against B, B wins against C --> A wins against C

Formula: P(a,b)=a and P(b,c)=b --> P(a,c)=a

Collective Decision Making

Weak Preference vs Strong preference

Weak preference is transitiv, complete, asymmetric, reflexive -> allows for total order of X

Strong preference is transitiv, perhaps complete, but not asymmetric, reflexive -> no total order

Collective Decision Making

Transaction cost examples

Finding a partner for a market interaction

Specifying the contract terms

Enforcing them according to the contract

Collective Decision Making

Institution's means to overcome the problems with markets

  • Transaction costs vanish if partners do not have to make/enforce contracts
  • Externalities are internalized if the parties merge
  • Specific investments are protected from hold-up
  • Vertical integration alleviates some problems of economies of scale (double-marginalization)

Collective Decision Making

Organizational cost

  • specification of the organizational contract (constitution)
  • coordination / decision procedure
  • safeguards against cheating of members (monitoring, incentives)
  • an agreement regarding the distribution of returns, costs, profits

Collective Decision Making

Four dimensions of contractual relations

  • Frequency: one-shot or repeated interaction
  • Opportunism: do people pursue their interest even with "cunning"
  • Specific investments: do the contributions of one party (or both) have a lower value elsewhere?
  • Rationality (usually): maximize their utility, or do they only intend to do so (but are "bounded")

--> spot-markets, long-term contracts, or organization?

Collective Decision Making

How to check for a Condorcet Voting Paradox

x∈O is a condorcet winner if, for any other element y∈
O, the number of members who strictly prefer x over y exceeds the number of members who strictly prefer y over x -> No other option defeats a condorcet winner in binary majority voting

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