Identical agents gather costly information, and then aggregate it through voting.Because information is a public good, information is underprovided relative to the social optimum. A "good" voting rule must give incentives to acquire information,as well as aggregate information efficiently. A voting rule that requires a large plurality (in the extreme, unanimity) to upset the status quo can be optimal only if the information available to each agent is sufficiently accurate. This result is independent of the preferences of voters and of the cost of information. Copyright The Review of Economic Studies Limited, 2004.

OUR AIM IN THIS PAPER is to study the incentives to acquire information. We consider decision problems where the payoff has the single-crossing property and signals are affiliated with the unknown parameter. We introduce the notion of risk-sensitiity, and establish that the value of information is higher in decision problems that are more risk-sensitive. We apply this result to auctions: we are able to show that a first price auction induces more information acquisition than a second price auction. Consider a decision maker choosing an action a to maximize the expected value of a Ž. payoff function u , a . The decision maker does not observe , which he regards as a random variable V. Instead, he observes the realization of a random variable X ,a signal which conveys information about .W eassume that the decision maker can make X more informative, at a cost. Making X more informative increases the expected payoff. We analyze the returns to making X more informative. Ž. We focus on problems where X and V are affiliated, and u , a has the weak Ž. Ž .

Citizens of two groups may engage in crime, depending on their legal earning opportunities and on the probability of being audited. Police audit citizens. Police behavior is fair if both groups are policed with the same intensity. We provide exact conditions under which forcing the police to behave more fairly reduces the total amount of crime. These conditions are expressed as constraints on the quantile-quantile plot of the distributions of legal earning opportunities in the two groups. We also investigate the definition of fairness when the cost of being searched reflects the stigma of being singled out by police.

Two office-motivated politicians compete for power by making promises to citizens. Unlike in voting models, a citizens' political activity is observable and subject to retaliation if the citizen happens to back the wrong politician. In equilibrium, a citizen supports the politician that is expected to win the political contest, not the one who promises her the most. Consequently, the incentives for politicians to redistribute resources and provide public goods are different from those in voting models. Citizens who are better able to coordinate with others receive more resources in equilibrium. Transition to democracy is not voluntary in this model.

In a cheap‐talk setting where the conflict of interest between sender and receiver is determined endogenously by the choice of parameters θ i for each agent i , conditions are provided that determine the sign of each agent's inverse demand for θ without assuming that the most informative equilibrium will necessarily be played in the cheap talk game. For two popular functional forms of payoffs, we derive analytically tractable approximations for agent i 's demand for θ . In an application where the θi 's are purchased on a competitive market, we provide conditions for a competitive equilibrium to feature maximal information transmission. In a principal–agent application where the agent's θ is set by the principal, our results show that information transmission will be partial. We consider extensions where: (1) the θ 's are acquired covertly rather than overtly and (2) the θ 's are traded after the sender has received the information.

Politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork-barrel spending. We compare a winner-take-all system—where all the spoils go to the winner—to a proportional system—where the spoils of office are split among candidates proportionally to their share of the vote. In a winner-take-all system the public good is provided less often than in a proportional system when the public good is particularly desirable. We then consider the electoral college system and show that it is particularly subject to this inefficiency.

This article presents a dynamic political-economic model of total government obligations. Its focus is on the interplay between debt and entitlements. In our model, both are tools by which temporarily powerful groups can extract resources from groups that will be powerful in the future: debt transfers resources across periods; entitlements directly target the future allocation of resources. We prove the following results. First, the presence of endogenous entitlements dampens the incentives of politically powerful groups to accumulate debt, but it leads to an increase in total government obligations. Second, fiscal rules can have perverse effects: if entitlements are unconstrained, and there are capital market frictions, debt limits lead to an increase in total government obligations and to worse outcomes for all groups. Analogous results hold for entitlement limits. Third, our model sheds some lights on the influence of capital market frictions on the incentives of governments to adopt fiscal rules, and implement entitlement programs. Finally, we identify preference polarization as a possible explanation for the joint growth of debt and entitlements.

Moral foundations theory is an influential empirical description of moral perception. According to this theory, individuals make moral judgments based on five distinct “moral foundations”: care, fairness, loyalty, authority, and sanctity. We provide a theory that explores the claimed evolutionary basis for these moral foundations. The theory conceptualizes these five moral foundations as specific modifications of fitness payoffs in a 2 × 2 game. We find that the five foundations are distinguishable from each other and evolutionarily stable. However, they are not a minimal set: strict subsets of the foundations suffice to describe all preferences that are evolutionarily stable. Not all evolutionarily stable foundations deliver social fitness improvement over the Nash equilibrium in the fitness game: we characterize which do. Finally, we study moral overdrive, that is, the situation in which the moral component of preferences totally dominates fitness payoffs and drives decision making entirely. While every one of the five foundations is compatible with moral overdrive in at least one fitness game, there is no fitness game in which moral overdrive is compatible with social fitness improvement. These results are partially extended to n × n games. We derive two testable implications from the theory and find empirical support for them.

We present a theoretical model of airport searches. The model extends previous work in the area in that detection conditional on search is imperfect. The hit rates tests for racial bias developed in Knowles, Persico, and Todd (2001) is shown to apply even in the presence of imperfections in monitoring. We then study two channels for improving airport security: better targeting and better detection. We show that better targeting does not necessarily decrease the overall crime rate, although it will decrease crime in the group that is targeted. Improved detection rates unambiguously decrease crime. Group-specific improvements in detection do not necessarily increase the number of searches for those groups. The analysis is extended to allow for the possibility that criminal passengers disguise themselves as members of low-crime groups.

We study workers who are employed by a large US retailer, work in many store locations, and are paid based on performance. By means of a border-discontinuity analysis, we document that workers become more productive and are terminated less often after a minimum wage increase. These effects are stronger among workers whose pay is more often supported by the minimum wage. However, when workers are monitored less intensely, the minimum wage depresses productivity. We interpret these findings through an efficiency wage model. After a minimum wage increase, profits decrease, and a calibration exercise suggests that worker welfare increases.