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Voting Over Efficient Decision Rules in Budget Balanced Organizations

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  • Hueth, Brent
  • Melkonian, Tigran A.

Abstract

We examine the choice of efficient decision rules in a budget-balanced organization. The organization awards a scarce ``project'' to the organization member who values it most, and redistributes some surplus from the project among all remaining members. An auction-based allocation rule tends to generate majority support when the number of members in the organization is large, and when the ex ante distribution of member types is relatively symmetric. A decrease in the value of the project, or an increase in the the amount that is redistributed under the ``managerial allocation'' rule, increases support for this rule when the probability of intermediate types winning the auction is small relative to 1/n.

Suggested Citation

  • Hueth, Brent & Melkonian, Tigran A., 2003. "Voting Over Efficient Decision Rules in Budget Balanced Organizations," Staff General Research Papers Archive 5164, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:5164
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    References listed on IDEAS

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