When and How to Live: Resolving Non-Contractible Uncertainty Efficiently
Some contracts (academic employment, for instance) carry voting rights on some issues and other contracts do not (health club memberships). Voting is one way of resolving noncontractible uncertainty; dictatorship is another. Majority rule resolves noncontractible uncertainty efficiently for issues where all players' stakes are expected to be about the same; dictatorship is efficient when one player's stake is much higher than any other players'. In general, weighted voting schemes where weights depend positively on expected stake and negatively on expected benefits are efficient when player's benefits are independent; the quota required is larger the lower are expected social benefits. Correlation modifies these results; minorities, for instance, have votes that count more under some circumstances. I apply this method to representative government and municipal governance.
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