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Problem Set With Solutions - Public Economics
Problem Set With Solutions - Public Economics
Problem Set With Solutions - Public Economics
Problem Set 1
Question 1.
Consider May’s (not Arrow’s) conditions for a valid voting procedure. For each of the
following procedures, which (if any) of the conditions are violated?
b) A committee votes by majority and the chairman has the tie-breaking vote.
d) A U.S. style “electoral college” voting scheme, where 9 voters are grouped into
to three “states” as follows: {1, 2, 3}, {4, 5, 6} and {7, 8, 9}. Each group selects a
representative by majority rule, and the representatives choose a policy by majority
rule.
Solution 1.
a) Neutrality is violated, since the status quo is advantaged.
b) Anonymity is violated, because exchanging the chairman’s vote with another person’s
vote may change the result.
c) Note that this question is a bit tricky, because it expands the setup to one where
people may or may not have a vote, depending on their behavior. This complicates
the application of the criteria. Still, one may say that quadratic vote buying violates
positive responsiveness. Suppose society is indifferent, i.e. the result is a tie. Now
some new people may switch their preference, but This may not change the result,
if they don’t buy votes.
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Public Economics Joël van der Weele
d) Anonymity is violated, because it matters ”who” votes for what. If you swap the
votes of two voters between states, this may change the outcome (e.g. 4 and 7 in
picture below).
(In a more general example you can generate violations of positive responsiveness:
if there is a tie among representatives, adding an extra vote for one of the proposal
in one of the states will not necessarily change the results if it doesn’t change the
representative.)
Question 2.
Consider Arrow’s conditions for an acceptable choice procedure. Provide an example of a
violation of one at least one criterion for each of the following voting rules. (That is, for
each rule, provide an example of a voter matrix and show it leads to a violation of one of
the criteria).
b) Plurality voting.
c) Run-off voting.
d) Which condition is removed to prove the Median Voter Theorem? Explain why the
median voter theorem fails if preferences are not single peaked.
Solution 2.
a) It has to violate either Transitivity, Universal Domain, or Non-Dictatorship. If you
allow all preference profiles, you can show some generate cycles (example: see slides)
and hence no winner. So the only way out is to impose restrictions on preferences
(violate U) or give the power to a single person (violate N).
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Public Economics Joël van der Weele
3 2 2
a b c
b c b
c a a
2 2 1
a c b
b b a
c a c
d) Condition U - unrestricted domain. The proof relies on the idea that people with a
preferred option to the left (right) of the median voter will always vote for xm over
any alternative on the opposite side of xm . If this does not hold, we cannot be sure
that xm always gets at least 1/2 of the vote against all alternatives, because some
voters may prefer an extreme proposal on the ”other side” over the median.
Question 3.
Look at the following excerpt from the newspaper “The Economist”, published on De-
cember 6th, 2018, when negotiations over Brexit were under way between Britain and the
EU. The graphs represent British public opinion over three options: “Remain in the EU”,
and two different forms of Brexit, a “No-deal Brexit” (resorting to WTO terms) and the
“Government’s deal” (a Brexit deal negotiated between then Prime Minister May and the
heads of state of the EU). Answer the following questions based on the information in the
graphs and the assumption of sincere voting.
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Public Economics Joël van der Weele
d) Can you design a (sequential) voting procedure that selects “No deal”, without being
dictatorial or excluding any options as an outcome?
Solution 3.
a) The surveys bottom of the figure shows the outcome of the pairwise comparisons. It
is clear that “Remain” beats both alternatives, and is the CW.
b) For Run-off voting, we need to know the preferred option for each voter. From the
surveys at the top of the figure, it’s clear that a plurality of voters have “Remain” as
a first ranked option, and the second highest is “No deal”. These go to the Run-off,
and it’s clear from the bottom part that “Remain” wins (also from the top part, but
more narrowly - but here it is not clear where the second choice voters come from -
so it is hard to establish if they come from the excluded option).
c) Suppose there are 100 voters. Borda can be computed in two ways: either by adding
up the votes from first and second choices for each voter, or by filling out the matrix
using pairwise comparisons.
Adding votes: From the surveys at the top of the figure:
• “Government’s deal” : it’s clear that about 22% voters have “Government’s
deal” as a first option, and about 48% have it as a second choice. So simplifying
to hundred voters, it would get 22 × 2 + 48 = 92 votes.
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Public Economics Joël van der Weele
• “No deal”: About 28% voters have “No deal” as a first option, and about
25% have it as a second choice. So simplifying to hundred voters, it would get
28 × 2 + 25 = 71 votes.
• “Remain”: About 44% voters have “Remain” as a first option, and about 10%
have it as a second choice. So simplifying to hundred voters, it would get
44 × 2 + 10 = 98 votes, so it wins.
Note that if there are 100 voters, we should have 300 votes in total. The votes don’t
add up.
Pairwise method: We need to use the part at the bottom, as Borda is computed
from pairwise comparisons. We can compute the amount of votes that each alterna-
tives get from the vote shares in these pairwise match-ups
Note that the rankings of these counts have the same winner, but differ in 2nd and
3rd place. So this difference must be due either to people giving inconsistent answers
or to the ”don’t know” category.
d) For instance: You could do a sequential vote in the first round between Brexit
(combining the two Brexit options) and No-Brexit. If some form of Brexit is chosen,
you have a second round in which you choose between the two forms.
“No deal” wins in this case. Since 22% +28%=50% favor some form of Brexit as
a first option and only about 44% favors “Remain” as a first option, Brexit wins
a plurality. The bottom part of the graph shows that “No deal” wins the second
round.
e) It must violate at least one criterion, as this is what Arrow’s theorem says. You
then have to prove which criterion it violates. For instance IIA: if you remove a
non-chosen alternative, does the answer change? In the procedure above, that is
indeed the case, because if you drop “Governments deal” from the vote, “Remain”
will win by simple majority.
Question 4.
Define a collective choice procedure as satisfying the “top condition” if an alternative is
never selected as a winner unless it is on top of at least one individual preference list.
Assuming sincere voting, prove (with logical arguments) or disprove (by counterexample)
each of the following statements:
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Public Economics Joël van der Weele
e) If a procedure satisfies the top condition, then it always selects the Condorcet winner
(if it exists).
Solution 4.
a) Yes, obviously the winner has to be ranked first by some.
b) Not necessarily, in the following matrix, b is CW, but never ranks first, thus violating
the top condition.
1 1 1
a d c
b b b
c c d
d a a
N.B.: To construct this, note that a 3-alternative example won’t work. Suppose
the potentially winning alternative A is always ranked second with the other two
alternatives dividing the first and last spots. But in this case, A must lose against
at least one of the other alternatives (unless it’s a three way tie).
d) Yes, just a sequential application of plurality voting: if you are not on top of any
profile, you are not going to get to the second round, so you cannot win.
3 2 2
b a c
a c a
c b b
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