School of Economics and Finance

No. 722: Get Rid of Unanimity: The Superiority of Majority Rule with Veto Power

Laurent Bouto , Georgetown University
Aniol Llorente-Saguer , Queen Mary University of London
Fédéric Malherbe , London Business School

September 29, 2014

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A group of agents wants to reform the status quo if and only if this is Pareto improving. Agents have private information and may have common or private objectives, which creates a tension between information aggregation and minority protection. We analyze a simple voting system - majority rule with veto power (Veto) - that essentially resolves this tension, for it combines the advantageous properties of both majority and unanimity rules. We argue that our results shed new light on the evolution of voting rules in the EU institutions and could help to inform debates about policy reforms in cases such as juries in the US.

J.E.L classification codes: D70

Keywords:Unanimity rule, Veto power, Information aggregation, Pareto criterion, Constructive abstention