College Economics Professor to be Published in Top Journal

The College of Business and Economics at Cal State East Bay is delighted to announce that Associate Professor of Economics Christian Roessler will be published in one of the top 5 Economics Journals.

The paper called 'Collective Commitment' was co-authored with Sandro Shelegia (Pompeu Fabra University, Spain) and Bruno Strulovici (Northwestern University) and will be published in the Journal of Political Economy. 

It's the first time that a CSU East Bay Economics Faculty has had a full-length publication in a top 5 Economics Journal, and only the 4th such publication within the whole California State University System. The 4 other top 5 journals are American Economic Review, Econometrica, Quarterly Journal of Economics and Review of Economic Studies.

The paper is about joint decision making in multiple stages - for example decisions considered by a committee with changing members. The decisions could be made according to any rule – such as majority voting, or we can allow some people to have more power than others, and the procedure might even change over time.

Dr. Roessler broke down the paper in non-technical terms:

"Because current decisions can affect future decisions, people will often vote ‘strategically’ (in economics, this means you vote against your direct interest, in order to influence future decision making). While the paper cites public policy examples, its result can certainly be applied to business problems. To illustrate, my executive team might feel that there should be a performance review of its members, but I’m worried that it might later lead to a vote to get me fired. So I, you, and others vote against the performance review, even though we all think it’s a good idea. Economists’ general instinct is that advance commitment to future actions solves this kind of problem: you put to the vote the proposal ‘We’ll review everyone’s performance, but nobody gets fired.’

Our paper proves a general theorem that this kind of commitment can’t work, unless (1) there is no problem to begin with (we’d make the right decisions even without commitment), or (2) we restrict the voting to a limited set of choices (disallowing the ones that are going to cause disagreement), or (3) we pass the power to vote on commitments off to a different group of people with different goals (or alter the power balance in the existing group, say by giving someone a veto right).

In the example I just gave, ‘nobody gets fired’ would lose in majority voting to ‘if the CFO performed badly, she gets fired, but nobody else’ (everyone except the CFO would support it, since we assumed they all want performance reviews with consequences – as long as they're not the ones who are getting fired). But this proposal would in turn lose to one where one more person is singled out to get fired, etc. No agreement is possible if we don’t take certain proposals off the table, or basically find an arbitrator.

That last possibility, having someone else make a commitment on our behalf, actually arises naturally in important contexts. For example, the founders of the United States wrote the constitution, governing our current legislative’s decisions. An alcohol addict might decide, in his clear-minded state, not to stock too much liquor, to save himself from getting drunk in his future state after he’s had a glass. A supplier and customer sign a contract, agreeing on a price, in order to prevent the buyer from negotiating a lower price later, after the production expenses have already been incurred (we call this ‘hold-up’ in economics). In each case, the power over commitment rests with a different group or individual from those who would have power over future decisions, and our paper shows that this is the central condition for commitment to be a useful instrument."

Dr. Roessler joined the College of Business and Economics in 2013 and is Director of the Masters program in Economics and Interim Director of the College's Smith Center. He completed his Ph.D. at the University of Melbourne, and held appointments at Brown University and the University of Vienna before joining the College. He teaches in both the Undergraduate and Graduate program with a specialization in applied Game Theory.