a dynamic theory of collective goods programs a collective goods program such as an entitlement program distributes benefits and costs according to constituents characteristics this paper presents a dynamic theory of the legislative choice of collective goods programs based on a sequential model of proposal making and voting in a majority rule legislature where the status quo in a session is given by the program last enacted a stationary markov perfect equilibrium is characterized for a unidimensional collective goods program and yields a generalized median voter theorem comparative statics on preferences and legislative procedures and a characterization of the dynamics of such programs equilibrium programs can expand or contract over time but they ultimately converge to the median on the path to that point legislators may act strategically to address the durability problem that a future legislature can undo the actions of the present legislature by strategically positioning the status quo to limit the changes that future legislatures can make

blame game politics in a coalition government abstract delays in the adoption of reforms is an important question in political economics this paper explores this issue in the context of a representative democracy where the government is a coalition and citizens observe neither the decision making process nor politicians preferences for a reform we show that a coalition member who favors a reform may nonetheless choose to veto its adoption thus delaying it until after the next election and let his coalition partners share the blame for the non adoption we refer to this strategy as blame game politics we then identify three reasons for a politician to play the blame game one is to make an issue salient in the next election a second reason is to avoid a split in his electorate which is accomplished by hiding his stance on an issue a third reason is to enhance bargaining power during the formation of the next government

approximately competitive equilibria in large finite economies abstract we consider exchange economies where each consumer may report or act according to any demand function provided that there exist situations that the consumer finds plausible in which the reported demand performs at least as well as the true demand we identify conditions under which as the size of the economy increases all the market clearing prices and allocations of the reported economy approximate the competitive equilibria of the true economy journal of economic literature classification numbers d51 d82

predictability and power in legislative bargaining the rules and procedures of legislatures often provide legislators with information bearing on the identities of upcoming proposers for a broad class of legislative bargaining games we establish that markovian equilibria necessarily deliver all economic surplus to the first proposer whenever the information structure permits the legislators to rule out some minimum number of proposers one round in advance this result holds regardless of the recognition process and even if players vary in patience and risk aversion it raises the possibility that procedures adopted in the interest of transparency may contribute to the imbalance of political power

a model of endogenous government formation political parties bargain over the allocation of cabinet portfolios when forming coalition governments noncooperative theories of legislative bargaining typically predict that the formateur enjoys a disproportionate share of government ministry positions however empirical evidence indicates that parties receive shares of portfolios proportional to their share of legislative seats that a government party contributes to the government coalition in support of gamson s law of portfolio allocation this article examines government formation as a process in which both the government coalition and the formateur are determined endogenously in equilibrium if parties have similar preferences over cabinet portfolios the share of seats they are allocated is proportional to the parties sizes

optimal taxation and fiscal constitution abstract assuming a world with excessive taxes the focuses of this paper are political mechanisms that ensure efficiency enhancing restraints on taxes in particular it is shown that supermajority requirements to approve tax increases as currently used in some us states is the means of attaining this objective their relationship to another such mechanism prevalent in earlier centuries that of franchise restrictions is discussed

dynamic bargaining and stability with veto players this note examines the structure of stationary bargaining equilibria in the finite framework of anesi 2010 the main result establishes a tight connection between the set of equilibrium absorbing points and the von neumann morgestern solutions assuming that players are patient that the voting rule is oligarchical and that there is at least one veto player with positive recognition probability a set of alternatives corresponds to the absorbing points of an equilibrium if and only if it is a von neumann morgenstern solution we also apply our analysis of ergodic properties of equilibria to the persistent agenda setter environment of diermeier and fong 2012 we show that all equilibria are essentially pure and we extend their characterization of absorbing sets to allow an arbitrary voting rule and by removing the restriction to pure strategy equilibira

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

bargaining in standing committees with an endogenous default committee voting has mostly been investigated from the perspective of the standard baron ferejohn model of bargaining over the division of a pie in which bargaining ends as soon as the committee reaches an agreement in standing committees however existing agreements can be amended this article studies an extension of the baron ferejohn framework to a model with an evolving default that reflects this important feature of policymaking in standing committees in each of an infinite number of periods the ongoing default can be amended to a new policy which is in turn the default for the next period the model provides a number of quite different predictions i from a positive perspective the key distinction turns on whether the quota is less than unanimity in that case patient enough players waste substantial shares of the pie each period and the size principle fails in some pure strategy markov perfect equilibria in contrast the unique markov perfect equilibrium payoffs in a unanimity committee coincide with those in the corresponding baron ferejohn framework ii if players have heterogeneous discount factors then a large class of subgame perfect equilibria including all markov perfect equilibria are inefficient

dynamic legislative policy making abstract we prove existence of stationary markov perfect equilibria in an infinite horizon model of legislative policy making in which the policy outcome in one period determines the status quo for the next we allow for a multidimensional policy space and arbitrary smooth stage utilities and we assume preferences and the status quo are subject to arbitrarily small shocks we prove that equilibrium continuation values are differentiable and that proposal strategies are continuous almost everywhere we establish upper hemicontinuity of the equilibrium correspondence and we provide weak conditions under which each equilibrium of our model determines an aperiodic transition probability over policies we establish a convergence theorem giving conditions under which the invariant distributions generated by stationary equilibria must be close to the core in a canonical spatial model finally we extend the analysis to sequential move stochastic games and to a version of the model in which the proposer and voting rule are determined by play of a finite perfect information game

markovian equilibria in dynamic spatial legislative bargaining existence with three players abstract the paper proves by construction the existence of markovian equilibria in a dynamic spatial legislative bargaining model three players bargain over one dimensional policies in an infinite horizon in each period a sequential protocol of proposal making and voting with random proposer recognitions and a simple majority produces a policy that becomes the next period s status quo an equilibrium exists for any profile of proposer recognition probabilities any profile of players ideal policies and any discount factor in equilibrium policies converge to the median s ideal policy players moderate and propose policies close to the median s ideal in an attempt to constraint future proposers but the tendency to moderate is a strategic substitute as the opponent of a moderating player does not moderate

a bargaining model of collective choice we present a general model of legislative bargaining in which the status quo is an arbitrary point in a multidimensional policy space in contrast to other bargaining models the status quo is not assumed to be bad and delay may be pareto efficient we prove existence of stationary equilibria the possibility of equilibrium delay depends on four factors risk aversion of the legislators the dimensionality of the policy space the voting rule and the possibility of transfers across districts if legislators are risk averse if there is more than one policy dimension and if voting is by majority rule for example then delay will almost never occur in one dimension delay is possible if and only if the status quo lies in the core of the voting rule and then it is the only possible outcome this core selection result yields a game theoretic foundation for the well known median voter theorem our comparative statics analysis yield two noteworthy insights i if the status quo is close to the core t hen equilibrium policy outcomes will also be close to the core a moderate status quo produces moderate policy outcomes and ii if legislators are patient then equilibrium proposals will be close to the core legislative patience leads to policy moderation

inefficiency in legislative policymaking a dynamic analysis this paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining the policy space incorporates both productive and distributive public spending and distortionary taxation the productive spending is investing in a public good that benefits all citizens e g national defense and the distributive spending is district specific transfers e g pork barrel spending investment in the public good creates a dynamic linkage across policymaking periods the analysis explores the dynamics of legislative policy choices focusing on the efficiency of the steady state level of

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

uniqueness of stationary equilibrium payoffs in coalitional bargaining we study a model of sequential bargaining in which in each period before an agreement is reached the proposer s identity is randomly determined the proposer suggests a division of a pie of size one each other agent either approves or rejects the proposal and the proposal is implemented if the set of approving agents is a winning coalition for the proposer the theory of the fixed point index is used to show that stationary equilibrium expected payoffs of this coalitional bargaining game are unique this generalizes eraslan 34 insofar as a there are no restrictions on the structure of sets of winning coalitions b different proposers may have different sets of winning coalitions c there may be a positive probability that no proposer is selected

uniqueness of stationary equilibria in bargaining one dimensional policies under super majority rules article history we consider negotiations selecting one dimensional policies individuals have instanta neous preferences represented by continuous concave and single peaked utility functions and they are impatient decisions arise from a bargaining game with random proposers and super majority approval ranging from the simple majority up to unanimity we provide sufficient conditions that guarantee the existence of a unique stationary subgame perfect equilibrium and we provide its explicit characterization the uniqueness of the equilibrium permits an analysis of the set of pareto optimal voting rules for symmetric distributions of peaks and uniform recognition probabilities unanimity is the unanimously preferred ma jority rule

bureaucrats voters and public investment abstract this paper explores the provision of a durable public good in romer and rosenthal s agenda setter model it identifies a type of equilibrium called a romer rosenthal equilibrium in which in every period the bureaucrat proposes the maximum level of public investment the voter will support the paper establishes that such an equilibrium exists for a variety of public good benefit functions equilibrium public good levels converge or almost converge to a steady state these steady states can involve a unique public good level being provided each period or may exhibit a two period cycle steady state public good levels exceed the voter s optimal level more surprisingly steady state equilibrium reversion levels can exceed the voter s optimal steady state level meaning that reversion levels cannot be used to bound the optimal level reflecting the inability of the agents to commit to their future proposing and voting behavior equilibrium paths are pareto inefficient

commitment deference and legislative instutions j nformational theories of legislative institutions have demonstrated the potential collective gains from committee specialization due to the use of restrictive amendment procedures for these 5 benefits to be realized however the floor majority must overcome a commitment problem i demonstrate that in a multistage game majority rule combined with the fact that generations of legislators overlap allows the legislature to solve the commitment problem and to sustain legislative norms and institutions even if legislators are finitely lived the model suggests that rather than restrictive amendment procedures it is the committee s expectation of floor deference that sustains committee specialization as a consequence legislative norms may collapse due to an unexpected influx of new members even if the distribution of preferences in the legislature does not change finally i discuss consequences for a comparative study of legislative institutions

persistence of power repeated multilateral bargaining with endogenous agenda setting authority abstract we extend a simple repeated multilateral bargaining model to allow successful agenda setters to hold on to power as long as they maintain the support of a majority of other committee members theoretically and experimentally we compare this endogenous power environment with a standard random power environment in which agenda setters are appointed randomly each period although the theoretical analysis predicts that the two environments are outcome equivalent the experimental analysis shows substantial differences in behavior and outcomes across the games the endogenous power environment results in the formation of more stable coalitions less equitable budget allocations the persistence of power across periods and higher long run inequality than the random power environment we present evidence that the stationary equilibrium refinements traditionally used in the literature fail to predict behavior in either game

legislative bargaining under weighted voting organizations often distribute resources through weighted voting we analyze this setting using a non cooperative bargaining game based on the baron ferejohn 1989 model unlike analyses derived from cooperative game theory we find that each voter s expected payoff is proportional to her voting weight an exception occurs when many high weight voters exist as low weight voters may expect disproportionately high payoffs due to proposal power the model also predicts that ex post the coalition formateur the party chosen to form a coalition will receive a disproportionately high payoff using data from coalition governments from 1946 to 2001 we find strong evidence ofsuch formateur effects

bargaining foundations of the median voter theorem abstract we give a game theoretic foundation for the median voter theorem in a one dimensional bargaining model based on baron and ferejohn s d baron j ferejohn bargaining in legislatures amer polit sci rev 83 1989 1181 1206 model of distributive politics we prove that as the agents become arbitrarily patient the set of proposals that can be passed in any pure strategy subgame perfect equilibrium collapses to the median voter s ideal point while we leave the possibility of some delay we prove that the agents equilibrium continuation payoffs converge to the utility from the median so that delay if it occurs is inconsequential we do not impose stationarity or any other refinements our result counters intuition based on the folk theorem for repeated games and it contrasts with the known result for the distributive bargaining model that as agents become patient any division of the dollar can be supported as a subgame perfect equilibrium outcome

the president and the distribution of federal spending scholarship on distributive politics focuses almost exclusively on the internal operations of congress paying particular attention to committees and majority parties this article highlights the president who has extensive opportunities both ex ante and ex post to influence the distribution of federal outlays we analyze two databases that track the geographic spending of nearly every domestic program over a 24 year period the largest and most comprehensive panels of federal spending patterns ever assembled using district and county fixed effects estimation strategies we find no evidence of committee influence and mixed evidence that majority party members receive larger shares of federal outlays we find that districts and counties receive systematically more federal outlays when legislators in the president s party represent them

dynamic pivotal politics we analyze a dynamic extension of a parsimonious model of lawmaking in which preferences evolve over time and today s policy becomes tomorrow s status quo unlike in existing models of pivotal politics policy makers voting behavior depends on the institutional environment and on their expectations about future economic and political shocks relative to sincere voting the equilibrium behavior exhibits a strategic polarization effect which increases with the degree of consensus required by the institution the volatility of the policy environment and the expected ideological polarization of the future policy makers the equilibrium behavior also exhibits a strategic policy bias which works against any exogenous policy bias embedded in the voting rule our analysis implies that the existing literature underestimates the inertial effect of checks and balances and overestimates the impact of institutional biases such as fiscally conservative budget procedures

a three player dynamic majoritarian bargaining game this file contains two sets of calculations first we report the calculations of demands and continuation values of proposition 1 second the mixing probabilities of proposition 1 are shown to be well defined

searching for good policies policymaking is hard policymakers typically have imperfect information about which policies produce which outcomes and they are left with little choice but to fumble their way through the policy space via a trial and error process this raises a question at the heart of democracy do democratic systems identify good policies to answer this question i introduce a novel model of policymaking in complex environments i show that good policies are often but not always found and i identify the possibility of policymaking getting stuck at outcomes that are arbitrarily bad notably policy stickiness occurs in the model even in the absence of institutional constraints this raises the question of how institutions and the political environment impact experimentation and learning i show how a simple political friction uncertainty over voter preferences interacts with political competition and policy uncertainty in a subtle way that surprisingly improves the quality of policymaking over time

procedural choice in majoritarian organizations a puzzling feature of self governing organizations is persistent majority support for restrictive seemingly nonmajoritarian procedures e g chairs and committees this article provides a theory of self enforcing majoritarian commitment to restrictive procedures we ask 1 why majorities consent to restrictive procedures in the first place 2 why restrictive procedures survive challenges thereafter and 3 with what policy consequences in the model a risk averse majority allocates procedural rights to increase procedural efficiency i e reduce the procedural uncertainty of free for all bargaining an equilibrium procedure is generally asymmetric and restrictive generating nonmajoritarian policy bias still a majority may persist in endorsing it so as to avoid amplifying procedural and policy uncertainty

on dynamic compromise abstract most legislatures require the consent of only a simple majority to pass a proposal so why don t legislative outcomes favor only a bare majority we show that compromise can be achieved if legislators are neither too impatient nor too patient and initial allocations are not too unequal the compromise is only sustainable if starting from the unequal allocations there is a possibility of spiraling towards a complete absence of compromise we find that the range of discount factors for which the equilibrium exists increases as the number of legislators increases in this sense compromise is easier in larger legislatures

formal versus informal legislative bargaining we study how the formality of a bargaining procedure affects its outcome we compare a formal baron ferejohn bargaining procedure to an informal procedure where players make and accept proposals in continuous time both constitute non cooperative games corresponding to the same bargaining problem a three player median voter setting with an external disagreement point this allows us to study formality in the presence and absence of a core and provides a natural explanation for the effects of preference polarization our results show that polarization hurts the median player and that formality matters the median player is significantly better off under informal bargaining

voting weights and formateur advantages in the formation of coalition governments over the last two decades a large and important literature has emerged that uses game theoretic models of bargaining to study legislative coalitions to test key predictions of these models we examine the composition of coalition governments from 1946 and 2001 these predictions are almost always expressed in terms of parties minimal integer voting weights we calculate such weights for all parliamentary parties in addition we develop a statistical model that nests the predictions of many of these models of the distribution of posts we find that for parties that join but did not form the government there is a linear relationship between their share of the voting weight in parliament and their share of cabinet posts the party that forms the government the formateur receives a substantial bonus relative to its voting weight the latter finding is more consistent with proposal based bargaining models of coalition formation and suggests that parties gain disproportionate power not because of their size but because of their proposal power

a merger approach to cartel overcharge analysis abstract to the extent that cartels are effective at maximizing joint profits they are akin to multi firm mergers this paper draws from merger analysis in particular upward pricing pressure to construct a model of cartel overcharges for practitioners this approach has the benefit that it strikes an appropriate balance between simplicity and flexibility moreover it relies mostly on data on margins and diversion ratios and can thus be used as either a complement or alternative to empirical approaches based for example on historical price data

bilateral bargaining with endogenous status quo abstract we consider a non cooperative bargaining game where in each round if a proposal is rejected with a probability the allocation implemented in the previous round is implemented as a status quo and the game proceeds to the next round and with the complementary probability no allocations are implemented and the negotiations break down we show that there exists a unique stationary subgame perfect equilibrium such that in any round a proposer offers a proposal such that the responder is indifferent between accepting and rejecting it and an agreement is achieved if the probability of breakdown is close to zero the sequence of equilibrium allocations evolves from the initial status quo to an allocation near the equilibrium allocation of the rubinstein bargaining game over time the effect of the initial status quo on the equilibrium allocations vanishes over time

monetary policy by committee consensus chairman dominance or simple majority this paper studies the theoretical and empirical implications of monetary policy making by committee under four different voting protocols the protocols are a consensus model where a supermajority is required for a policy change an agenda setting model where the chairman controls the agenda a dictator model where the chairman has absolute power over the committee and a simple majority model where policy is determined by the median member these protocols give preeminence to different aspects of the actual decision making process and capture the observed heterogeneity in formal procedures across central banks the models are estimated by maximum likelihood using interest rate decisions by the committees of five central banks namely the bank of canada the bank of england the european central bank the swedish riksbank and the u s federal reserve for all central banks results indicate that the consensus model fits actual policy decisions better than the alternative models this suggests that despite institutional differences committees share unwritten rules and informal procedures that deliver observationally equivalent policy decisions

capital taxation under political constraints this paper studies optimal dynamic tax policy under the threat of political reform a policy will be reformed ex post if a large enough coalition of citizens supports reform thus sustainable policies are those that will continue to attract enough political support in the future we find that optimal marginal capital taxes are either progressive or u shaped so that savings are subsidized for the poor and or the middle class but are taxed for the rich u shaped capital taxes always emerge when individuals political behavior is purely determined by economic motives

the political economy of state medicaid policy we develop and test a market based model to explain variations in states welfare medicine policy decisions the empirical results support the model of state policy outputs indicating that states spending efforts for welfare medicine are most sensitive to the supply of services within their borders we learn in addition that spending effort declines with demand for services indicating that the states spending the highest proportions of total personal income for the program are those who need it most and can afford it least measures of political system development affect spending effort positively and significantly suggesting that ideology diversity of interests and administrative professionalism increase states welfare efforts

dynamic collective choice with endogenous status quo we analyze a bargaining situation in which preferences evolve over time and the previous agreement becomes the next status quo the endogeneity of the status quo exacerbates the players conflict of interest players disagree more often than under exogenous status quo this leads to inefficiencies and status quo inertia under certain conditions the negotiations can come to a complete gridlock players never reach an agreement gridlock can occur between players with arbitrarily similar preferences provided they are sufficiently patient in legislative settings our model predicts polarization and explains why legislators may fail to react promptly to economic shocks

seniority in legislatures we construct a stochastic game model of a legislature with an endogenously determined seniority system we model the behavior of the legislators as well as their constituents in an infinitely repeated divide the dollar game each legislative session must make a decision on redistributional issues modeled as a divide the dollar game however each session begins with a vote in which the legislators decide by majority rule whether or not to impose on themselves a seniority system legislative decisions on the redistributional issues are made by the baron ferejohn rule an agenda setter is selected by a random recognition rule which in our model is a function of the seniority system selected the agenda setter makes a proposal on redistributional issues and the legislature then votes whether to accept or reject the agenda setters proposal if the legislature rejects the proposal another agenda setter is randomly selected and the process is repeated if the legislature accepts the proposal the legislative session ends and the voters in each legislative district vote whether to retain their legislator or throw it out of office the voters verdict determines the seniority structure of the next period legislature we find a stationary equilibrium to the game having the property that the legislature imposes on itself a non trivial seniority system and that legislators are always reelected