Information manipulation and majority rule

Abstract

This paper studies endogenous institution in the presence of information manipulation. We show majority rule discourages information manipulation, reducing Type II errors in collective decision-making. In equilibrium, the optimal majority rule strategically balances the reduction in Type II errors associated with discouraging information manipulation with the potential increase in Type I errors. When it comes to green environmental issues, member countries often adopt a majority rule voting system. This is because these issues typically involve high inherent risks that affect all countries on a global scale, and low heterogeneity among members in terms of the desire to address these challenges.