The Elasticity of Committee Decisions with Alterations in the Members’ Preference Schedules

Abstract

The problem stated. To illustrate the type of problem that we wish to consider, we may take the example of a cartel in which price-fixing is done once a year by a committee which uses a simple majority. Let us suppose that at a meeting of this committee, the basic phenomena (the demand for its product and its cost position) leave the position of each firm identical with what it had been at the last annual meeting. The preference schedule of each firm in regard to price will be identical with its preference schedule of the previous year. Unless some new source of change is introduced, the same price as before will be selected. One or more of the firms, we may suppose, are pondering the chance of being able to influence the decision of the cartel by inducing others, through enticement or threat, to alter their voting behaviour at the next meeting of the committee. The enticement may be the offer of some trading or business advantage, or the threat may be to leave the cartel and enter into competition with the remaining members. We wish to examine and, if possible, to measure the effect on the committee’s decision when some of the members alter their voting.

The reader who is unacquainted with Economics should omit this chapter.