A committee decides collectively whether to accept a given proposal or to maintain the status quo. Committee members are privately informed about their valuations and monetary transfers are possible. According to which rule should the committee make its decision? We consider strategy-proof and anonymous mechanisms and solve for the decision rule that maximizes utilitarian welfare, which takes monetary transfers to an external agency explicitly into account. For regular distributions of preferences, we find that it is optimal to exclude monetary transfers and to decide by qualified majority voting. This sheds new light on the common objection that criticizes voting for its inefficiency.
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)