Equilibrium Results in Committee Settings: Theory and Experiments on Decision Costs

Abstract

"In this paper we formulate a cost-induced equilibrium concept. This equilibrium is generated from transaction costs connected with a sequential agenda process. Our claim is that most collective choice Institutions carry with them decision costs. If these transaction costs are very large, they are sufficient to produce stable collective choices. One of our findings illustrate that the size of these costs can be rather minimal and still produce a set of equilibrium outcomes. From a theoretical standpoint this leads us to conclude that cost-induced equilibrium are common in the empirical world.

"We attempt to provide an empirical test of a cost-induced equilibrium using a laboratory experimental setting. Our results are disappointing. However, the experiments reported here are derived from pre-tests of a micro-computer network. At this point it is unclear whether the experimental design is producing independent effects or whether our results are valid. Given the variety of behavioral differences we observe, we doubt that the latter is the case. We suggest a number of additional experiments to more fully explore these results. In the meantime we are left with our puzzling empirical results and a call for further experimental research."