Project A2:

The role of asymmetric information in political reform processes



Prof. Dr. Hans Peter Grüner



Charles Louis-Sidos / Inken Frederike Töwe / Fabian Greimel / Lukas Neuhauser


Pierre Boyer, Ph.D. / Dr. Daniel Müller / Sander Renes, Ph.D. / Dr. Philipp Zahn

 Duration:01.01.2018 - 31.12.2021



This project theoretically and empirically investigates the role of asymmetric information in collective decisions about political reforms. Our objective is to understand to what extent reform failures can be attributed to information asymmetries, and to find out how such failures can be mitigated by improving (i) the design of reform proposals, and (ii) political institutions that govern reform processes. Under perfect information, efficient contracting on political reforms would be possible. Those who benefit from a reform measure could then compensate those who lose. However, in practice, voters, politicians and experts all hold relevant information about the consequences of a reform. We theoretically investigate the requirements that allow the successful (efficient) aggregation of individual preferences for political reforms when information about the gains and losses is imperfect and dispersed. A particular focus lies on constructing compensation packages to overcome resistance against reforms when individual preferences are private information. We take into account that, in practice, individuals can often reject new rules or reform proposals at different stages. Moreover, we want to study the performance of decision-making mechanisms with a low level of complexity, i.e. mechanisms that are simple enough to be implementable in practice. The project also empirically studies the support for certain reform packages and compensation schemes using in particular the SFB Internet panel. A new focus of the project will be on practical applications regarding the fiscal and financial governance in Europe.