Dynamic group decision making

• Main Author: Zápal, Jan
• Published: London School of Economics and Political Science (University of London) 2012
• Subjects: 658.4; HB Economic Theory
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.571030

A common theme running throughout the three chapters of this thesis is dynamic recurring group decision making. The first chapter sets up a model with endogenous status-quo (dynamic bargaining model) in which decision makers are uncertain about their own future preferences. The main focus of the chapter is on how different bargaining protocols influence equilibrium decisions. The two protocols considered are i) implicit status-quo bargaining protocol in which present period policy serves as the status-quo for the next period and ii) explicit status-quo bargaining protocol in which the current decision involves both current policy and a possibly different status-quo for the future. The main observation of the chapter is that the former bargaining protocol leads to decisions diverging from the preferences of the actors involved even in the periods in which their preferences coincide, this divergence being driven by the concerns to maintain a bargaining position for the future. The latter bargaining protocol, on the other hand, delivers decisions fully reflecting preferences of the actors involved in the periods when these coincide, but may lead to decisions re ecting only the proposer's preferences. The second chapter shows how to construct equilibria in a class of dy-namic bargaining models in which players have fixed preferences over all the dimensions of a policy space. The construction applies both to one-dimensional and multi-dimensional policy spaces and delivers equilibria with simple and intuitive structure. The chapter works out several examples to show i) the multiplicity of equilibria and ii) the non-monotonicity of the existence of the simple equilibria in the underlying model parameters. The third paper is a collaborative work with Roman Horvath and Katerina Smidkova from the Czech National Bank currently published as a CNB working paper). The chapter analyses decision making in monetary policy committees, the decision making bodies of central banks. On the empirical side, the chapter shows that voting records of monetary policy committees are informative about their own future decisions. On the theoretical side, the chapter shows that the voting records' predictive power can be generated through theoretical models used in the group decision making literature.