Welfarist evaluations of decision rules under interstate utility dependencies

Social Choice and Welfare 34 (2):315-344 (2010)
We provide welfarist evaluations of decision rules for federations of states and consider models, under which the interests of people from different states are stochastically dependent. We concentrate on two welfarist standards; they require that the expected utility for the federation be maximized or that the expected utilities for people from different states be equal. We discuss an analytic result that characterizes the decision rule with maximum expected utility, set up a class of models that display interstate dependencies and run simulations for different dependency scenarios in the European Union. We find that, under positive correlations, the welfare distribution tends to be less sensitive to the choice of the decision rule, whereas it can be important under negative correlations. The results that Beisbart and Bovens (SCW 29, p. 581, 2007) have found for two types of models without interstate dependencies are relatively stable. There are exceptions, though, under which the way the welfare distribution is shaped by a decision rule is significantly affected by dependencies.
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