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Two-Class Voting: A Mechanism for Conflict Resolution

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  • Ernst Maug
  • Bilge Yilmaz

Abstract

We discuss two-class voting procedures where voters are divided into classes and a separate majority is required in each class. Examples include Chapter 11 bankruptcy proceedings and some political mechanisms. We investigate how voting mechanisms aggregate information dispersed among voters when voters have conflicts of interests as well as different information regarding a proposal. We find that two-class voting provides a significant improvement over one-class voting in all situations where voters have significant conflicts of interests, and where the voters are relatively evenly divided between interest groups. However, two-class voting is inefficient absent conflicts of interests.

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  • Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution," American Economic Review, American Economic Association, vol. 92(5), pages 1448-1471, December.
    • Handle: RePEc:aea:aecrev:v:92:y:2002:i:5:p:1448-1471
    Note: DOI: 10.1257/000282802762024584
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    References listed on IDEAS

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    2. Van Wesep, Edward D., 2014. "The Idealized Electoral College voting mechanism and shareholder power," Journal of Financial Economics, Elsevier, vol. 113(1), pages 90-108.
    3. Olaru, Ioan & Zachariadis, Konstantinos, 2011. "Trading and voting in distressed firms," LSE Research Online Documents on Economics 119076, London School of Economics and Political Science, LSE Library.
    4. Berliant, Marcus & Tabuchi, Takatoshi, 2011. "Local politics and economic geography," MPRA Paper 28120, University Library of Munich, Germany.
    5. Stefano Demichelis & Klaus Ritzberger, 2007. "Corporate Control and the Stock Market," Carlo Alberto Notebooks 60, Collegio Carlo Alberto.
    6. Bar-Isaac, Heski & Shapiro, Joel, 2020. "Blockholder voting," Journal of Financial Economics, Elsevier, vol. 136(3), pages 695-717.
    7. Berno Buechel & Lydia Mechtenberg & Alexander F. Wagner, 2022. "When do proxy advisors improve corporate decisions?," Swiss Finance Institute Research Paper Series 22-47, Swiss Finance Institute.
    8. Nicolae STEF, 2013. "Severity of the Voting Rules in Bankruptcy," Working Papers of LaRGE Research Center 2013-07, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    9. Rydqvist, Kristian & Maug, Ernst, 2004. "Do Shareholders vote Strategically? Evidence on the Advisory Role of Annual General Meetings," CEPR Discussion Papers 4192, C.E.P.R. Discussion Papers.
    10. Ian Ayres & Colin Rowat & Nasser Zakariya, 2004. "Optimal two stage committee voting rules," Game Theory and Information 0412006, University Library of Munich, Germany.
    11. Iaryczower, Matias, 2007. "Strategic voting in sequential committees," Working Papers 1275, California Institute of Technology, Division of the Humanities and Social Sciences.
    12. Paolo Balduzzi & Clara Graziano & Annalisa Luporini, 2014. "Voting in small committees," Journal of Economics, Springer, vol. 111(1), pages 69-95, February.
    13. Jing Xie, 2024. "Are passive investors also passive voters? Evidence from securities lending by mutual funds," Working Papers 202410, University of Macau, Faculty of Business Administration.
    14. Marcus Berliant & Takatoshi Tabuchi, 2014. "Local Politics And Economic Geography: Information Aggregation And Polarization," Journal of Regional Science, Wiley Blackwell, vol. 54(5), pages 806-827, November.
    15. Elisabeth Schulte, 2012. "Communication in committees: who should listen?," Public Choice, Springer, vol. 150(1), pages 97-117, January.
    16. Stef Nicolae, 2017. "Voting Rules in Bankruptcy Law," Review of Law & Economics, De Gruyter, vol. 13(1), pages 1-39, March.
    17. Maug, Ernst & Rydqvist, Kristian, 2007. "Do shareholders vote strategically? Voting behavior, proposals screening, and majority rules," Papers 07-35, Sonderforschungsbreich 504.
    18. Ross Hickey, 2013. "Bicameral bargaining and federation formation," Public Choice, Springer, vol. 154(3), pages 217-241, March.

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