Majority rule or dictatorship? The role of collective-choice rules in resolving social dilemmas with endogenous institutions

Collective-choice rules aggregate individual choices into a group choice.
This study addresses the role of collective-choice rules in a social dilemma situation in which group members can repeatedly choose a combination of institutions to achieve self-governance. Specifically, we investigate three collective choice rules: majority voting, dictatorship and rotating dictatorship. We identify a direct and an indirect channel through which collective-choice rules may affect groups’ behavior and performance in the game. Our main findings are: (1) In terms of the direct effects, there is no evidence of a “democracy premium" (i.e., cooperation level is higher under the institutions chosen via a democratic rule than when the same institutions are chosen via a non-democratic rule). (2) In terms of the indirect effects, institutional choices produced by a fixed dictator are more stable than produced by rotating dictators. (3) Overall, groups with a fixed dictator earn the highest payoffs.