Publications by PSE researchers

In this paper we investigate the potential of deliberation to create consensus among fully informed citizens. Our approach relies on a two cognitive assumptions i. citizens need a thinking frame (perspective) to consider an issue; ii. citizens cannot consider all relevant perspectives simultaneously only sequentially. Together this implies that citizens' opinions are intrinsically contextual i.e., they have quantum-like characteristics. We capture contextuality in a simple quantum cognitive model. We find that in a binary voting problem, letting two citizens with alternative thinking frames and opposite voting intentions deliberate under the guidance of a benevolent facilitator allows reaching consensus. Opinion change occurs as the result of citizens' action in terms of "putting themselves in another citizen's shoes". The probability for reaching consensus depends on the correlation between perspectives and on their sophistication (dimensionality). Maximally uncorrelated sophisticated perspectives give the best chance for opinion change. With more than two citizens, multiple deliberation rounds with experts allow reaching consensus with significant probability. A first central lesson is that with contextual opinions, the diversity of perspectives is beneficial and necessary to overcome initial disagreement. We also learn that well-design procedures managed by a facilitator are needed to increase the probability for consensus. An additional finding is that the richness of a thinking frame helps convergence toward a joint position. The optimal facilitator's strategy entails focusing deliberation on a properly reduced problem.

In this paper, we investigate the Investor-State Dispute Resolution Settlement (ISDS) framework, which governs dispute resolution between foreign investors and host states in many bilateral and multilateral trade agreements. We show that ISDS delivers fair justice in a one-shot setting. In a repeated-interaction setting however, it is prone to collusion to the benefit of all parties except the host states. Three factors are determinant: First, the investors are the sole parties able to file cases; Second, arbitrators' earning prospects depend on the investors' filing cases; And finally, treaties leave substantial discretion to arbitration courts in their interpretation of treaties' provisions. We give conditions for pro-business collusion between investors and arbitrators to develop and we show how it makes it profitable for foreign investors to file high-stake claims against states in response to new environmental, social or health regulations. Further, we address regulatory chill and show how the fear of ISDS attacks can hold back welfare improving regulation in the host country. Finally, we extend the model to show how regulatory chill affect policy-making in other countries in which the investor operates with similar activities.

This article studies the problem faced by activists who want to maximize firms’ compliance with high environmental standards. Our focus is on radical activism which relies on non-violent civil disobedience. The threat of disruptive actions is used to force firms to concede, i.e., to engage in self-regulation. We adopt a mechanism design approach to characterize an optimal campaign. The analysis indicates that the least vulnerable and most polluting firms should be targeted with disruptive actions while the others are granted a guarantee not to be targeted in exchange for concessions. This characterization allows us to study the determinants of the activist’s strength and how it is affected by repression, a central feature in civil disobedience. We find that an optimal campaign is relatively resilient to repression and that it creates incentives to free ride in the prosecution for individual firms. Next, we consider heterogeneity in firms’ abatement costs and find that an optimal campaign optimizes the allocation of abatement efforts and creates incentives for innovation. We discuss some other welfare properties of the optimal campaign.

We study the problem faced by activists who want to maximize firms'compliance with high environmental standards. Our focus is on radical activism which relies on non-violent civil disobedience. The threat of disruptive actions is used to force firms to concede i.e., to engage in self-regulation. We adopt a mechanism design approach to characterize an optimal campaign. The analysis informs that the least vulnerable and most polluting firms should be targeted with disruptive actions while the others are granted a guarantee not to be targeted in exchange for a concession. This characterization allows studying the determinants of the activist's strength and how it is affected by repression, a central feature in civil disobedience. We find that an optimal campaign is relatively resilient to repression and that it creates incentives to free ride in prosecution for individual firms. Next, we consider heterogeneity in firms'abatement cost to find that an optimal campaign optimizes the allocation of abatment efforts and creates incentives for innovation. We discuss some other welfare properties of optimal campaign.

Quantum-like decision theory is by now a theoretically well-developed field (see e.g., Danilov, Lambert-Mogiliansky & Vergopoulos, 2018). We provide a first test of the predictions of an application of this approach to persuasion. One remarkable result entails that, in contrast to Bayesian persuasion, distraction rather than relevant information has a powerful potential to influence decision-making. We first develop a quantum decision model of choice between two uncertain alternatives. We derive the impact of persuasion by means of distractive questions and contrast them with the predictions of the Bayesian model. Next, we provide the results from a first test of the theory. We conducted an experiment where respondents choose between supporting either one of two projects to save endangered species. We tested the impact of persuasion in the form of questions related to different aspects of the uncertain value of the two projects. The experiment involved 1253 respondents divided into three groups: a control group, a first treatment group and the distraction treatment group. Our main result is that, in accordance with the predictions of quantum persuasion but in violation with the Bayesian model, distraction significantly affects decision-making. Population variables play no role. Some significant variations between subgroups are exhibited and discussed. The results of the experiment provide support for the hypothesis that the manipulability of people’s decision-making can to some extent be explained by the quantum indeterminacy of their subjective representation of reality.

This article addresses the issue of favoritism at the design stage of a complex procurement auction. A community of citizens procures a project but lacks the ability to translate its preferences into operational technical specifications. This task is delegated to a public officer who may collude with one of the firms in exchange of a bribe. We investigate a simple accountability mechanism that requires justifying one aspect of the technical decision determined by the alerts of competitors (alert-based accountability [ABA]). We find that relying on competitors enables the community to deter favoritism significantly more easily than random challenges. The penalty needed to fully deter corruption is independent of the complexity of the project. It depends on the degree of differentiation within the industry. In an illustrative example, we study the patterns of favoritism when corruption occurs under ABA and compare them with the patterns in the random challenge mechanism.

We study the problem faced by activists who want to maximize …rms'compliance with high environmental standards. Our focus is on radical activism which relies on non-violent civil disobedience. Disruptive actions and the threat thereof are used to force …rms to concede i.e., to engage in self-regulation. We address the optimal use of scarce activist resources in face of incomplete information by looking at a general mechanism, directly adapted from Myerson's (1981) optimal auction theory. The characterization informs that the least vulnerable and most polluting …rms should be targeted with disruptive actions while the others are granted a guarantee not to be targeted in exchange for a concession. This characterization allows studying the determinants of the activist's strength and how it is a¤ected by repression, a central feature for civil disobedience. We …nd that optimal radical activism is relatively resilient to repression. In an extension that accounts for asymmetry between …rms'abatement cost, we …nd that the mechanism optimizes the allocation of abatment efforts and creates incentives for innovation. We discuss some other welfare properties of optimal activism.

Individuals are required to cope with uncertain, dispersed, incomplete, and incompatible sources of information in real life. We devised an experiment to reveal empirical “anomalies” in the process of acquisition, elaboration and retrieval of economic related information. Our results support the existence of a dual process in memory that is posited by the Fuzzy Trace Theory: acquisition of information leads to the formation of a gist representation which may be incompatible with the exact verbatim information stored in memory. We gave participants complex and complete information and then measured their cognitive ability. We conclude that individuals used their gist representation rather than processing verbatim information appropriately to make an evaluation Finally, we provide evidence that subjects with low cognitive abilities tend to demonstrate more often this specific behavior.

Quantum-like decision theory is by now a theoretically well-developed field (see e.g., Danilov et al. 2018A). We here test the predictions of an application of this approach to persuasion. One remarkable result entails that in contrast to Bayesian persuasion, distraction rather than relevant information has a powerful potential to influence decision-making. We first provide a quantum decision model for a choice between two uncertain alternatives. We derive the impact of persuasion by means of distractive questions and contrast them with the predictions of the Bayesian model. Next, we conduct an experiment where respondents choose between supporting either one of two projects to save endangered species. We test the impact of persuasion in the form of questions related to different aspects of the uncertain value of the two projects. The experiment involves 900 respondents divided into three groups: a control group, a first treatment group and the distraction treatment group. Our main result is that, in accordance with the predictions of quantum persuasion but in violation with the Bayesian model, distraction significantly affects decision-making. Population variables play no role. Some significant variations between subgroups are exhibited and discussed. The results of the experiment provide support for the hypothesis that the manipulability of people's decision-making can be explained by the quantum indeterminacy of their subjective representations of reality.

Quantum cognition in decision making is a recent and rapidly growing field. In this paper, we develop an expected utility theory in a context of non-classical (quantum) uncertainty. We replace the classical state space with a Hilbert space which allows introducing the concept of quantum lottery. Within that framework, we formulate axioms on preferences over quantum lotteries to establish a representation theorem. We show that demanding the consistency of choice behavior conditional on new information is equivalent to the von Neumann–Lüders postulate applied to beliefs. A dynamically consistent quantum-like agent may violate dynamic recursive consistency, however. This feature suggests interesting applications in behavioral economics as we illustrate in an example of persuasion.

In this paper we investigate the potential for persuasion arising from the quantum indeterminacy of a decision-maker’s beliefs, a feature that has been proposed as a formal expression of well-known cognitive limitations. We focus on a situation where an agent called Sender only has few opportunities to influence the decision-maker called Receiver. We do not address the full persuasion problem but restrict attention to a simpler one that we call targeting, i.e. inducing a specific belief state. The analysis is developed within the frame of a -dimensional Hilbert space model. We find that when the prior is known, Sender can induce a targeted belief with a probability of at least when using two sequential measurements. This figure climbs to 1/2 when both the target and the belief are known pure states. A main insight from the analysis is that a well-designed strategy of distraction can be used as a first step to confuse Receiver. We thus find that distraction rather than the provision of relevant arguments is an effective means to achieve persuasion. We provide an example from political decision-making.

In this paper we investigate the sensitivity to persuasion linked to the quantum indeterminacy of a decision-maker's beliefs. We formulate the persuasion problem in the context of quantum-like beliefs and we provide an economic example of belief manipulation that illustrates the setting. We next establish a theoretical result showing that in the absence of constraints on measurements, any belief state can be obtained as the result of a suitable sequence of measurements. We finally discuss the practical significance of our result in the context of persuasion.