Ambiguity-averse Political Designer

Abstract: The fact that voters can manipulate election outcomes by misrepresenting their true preferences over competing political parties or candidates is commonly viewed as a major flaw of democratic voting systems. It is argued that insincere voting typically leads to suboptimal voting outcomes. This paper considers the problem of an ambiguity averse mechanism designer who wishes to design a mechanism for future elections and who is ex-ante uncertain about the state of both true and strategic preferences of voters: the mechanism designer perceives ambiguity about the preferences of voters, and has maxmin preferences (Gilboa and Schmeidler [1989]). We show that in any three-candidate election, any convex combination of the simple plurality rule and the Borda count is a first-best solution within the large class of positional rules: each maximizes the equilibrium worse-case impact of strategic voting on aggregate ordinal welfare. Our analysis explicitly reveals the designer's utility function, and shows that the social value of making information available in a democracy depends on the voting mechanism. Our finding provides a new answer to the longstanding question of why certain rules, such as first-past-the-post, although manipulable, are more common in practice.

Keywords: Finitely Repeated Games, Subgame Perfect Nash Equilibrium, Folk Theorem, Discount Factor

JEL classifcation: C72, C73.