Abstract
We study how a principal should optimally choose between implementing a new policy and maintaining the status quo when information relevant for the decision is privately held by agents. Agents are strategic in revealing their information; the principal cannot use monetary transfers to elicit this information, but can verify an agent's claim at a cost. We characterize the mechanism that maximizes the expected utility of the principal. This mechanism can be implemented as a cardinal voting rule, in which agents can either cast a baseline vote, indicating only whether they are in favor of the new policy, or make specific claims about their type. The principal gives more weight to specific claims and verifies a claim whenever it is decisive.
Original language | English (US) |
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Pages (from-to) | 923-954 |
Number of pages | 32 |
Journal | Theoretical Economics |
Volume | 15 |
Issue number | 3 |
DOIs | |
State | Published - Jul 1 2020 |
Keywords
- Collective decision
- D71
- D82
- costly verification
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)