Delegating Irreversible Policy Decisions with Preference Heterogeneity

“The possibility of irreversible decisions can give extreme policy-makers the platform to have an out-sized impact on the future. We investigate the timing of irreversible decisions in a sequential, finite game. In this game policy-makers can either implement a policy from a continuum of policy options, or delegate decision authority to subsequent policy-makers who are at least as well informed about optimal policies but have idiosyncratic preferences. Importantly, in this environment agents with extreme preferences regarding polices can implement extreme policies. We show that there exists a threshold, whereby agents with preferences more extreme than this threshold choose to implement
a policy. This threshold preference unravels as the sequence progresses, becoming incrementally less extreme. We also consider the optimal actions for a society. First, we show that policy-makers will tend to be more inclined to implement policies than is socially optimal. Then we consider optimal behaviour for society when they are afforded power to deter policy-makers from implementing policies. Since policy-makers with the most extreme preferences have the most to gain by implementing policies (and hence are less swayed by deterrents), our analysis suggests that under intuitive application of deterrents society may, inadvertently, cause more extreme policies to be implemented.”