bargaining over governments in a stochastic environment in this paper i structurally estimate a stochastic bargaining model of government formation in a multiparty parliamentary democracy and i conduct policy experiments to evaluate the effects of changes in the bargaining procedure i show that the model fits well data on the duration of negotiations and government durations in postwar italy also i show that changes in the proposer selection process would not affect either the duration of negotiations or government durations whereas the imposition of a strict deadline would in general reduce the incentives to delay agreement as well as government durations

an empirical investigation of coalitional bargaining procedures abstract models of government formation processes in multi party democracies are usually highly sensitive to the rules that govern the selection of formateurs i e the parties selected to propose a potential government the theoretical literature has focused on two selection rules selection proportional to seat share and selection in order of seat share in this paper we use a new data set on government formations in 11 parliamentary democracies to empirically assess which selection rule most closely approximates the data we find that while there is little empirical support for selection in order of seat share proportional selection fits the data well however we also find that a simple alternative that combines the insights of the two selection rules outperforms both of them in their ability to explain the data

do parties matter estimating the effect of political power in multi party systems abstract when there are more than two parties policy outcomes are typically the result of a bargaining process we investigate whether changes in political power for various parties have an effect on tax policies we use an instrumental variable approach where close elections provide the exogenous variation in our variable of interest voting power in order to isolate close elections in a proportional election system we develop a new simulation algorithm using data from german municipalities in the state of bavaria our estimation results suggest that political power does matter for policies somewhat surprisingly the center left party spd is found to lower all three locally controlled taxes whereas the greens increase both property taxes considerably these results remain robust across a range of specifications our partisan effect for the spd is also confirmed by a simple regression discontinuity estimation using mayoral elections

optimal growth with many consumers abstract a method is described for constructing all pareto optimal allocations for a dynamic economy with many heterogeneous consumers under certainty in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time optimal perfect foresight competitive equilibrium allocations are obtained through the study of a dynamic program for an economy with one consumption good sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth for a two person exchange economy sufficient conditions are given for the global asymptotic stability of the unique interior stationary point

time preference and international lending and borrowing in an overlapping generations model two economies represented by diamond type overlapping generations models and differing only in their pure rates of time preference are joined together capital formation balance of payments behavior and welfare are compared under autarky and openness with a positive natural rate of growth the low time preference country runs a current account surplus in the steady state but not necessarily outside it if preexisting capital is not shiftable between countries integration in the world economy makes the high time preference country worse off in the short run the ranking of stationary utility levels under autarky and openness is ambiguous

continuity in auction design abstract j cremer and r p mclean econometrica56 1988 1247 1257 have shown that the auctioneer can extract all the surplus when the private valuations of bidders are not statistically independent the paper shows that this result does not necessarily arise under limited liability or risk aversion under limited liability and or risk aversion we prove that the functions corresponding to the auctionner s optimal expected gain and to the maximum total surplus are continuous in the space of possible information distributions thus by continuity the auctioneer wil not be able to extract all the rents when bidders private valuations are approximately independent

separation of powers and political accountability political constitutions are incomplete contracts and therefore leave room for abuse of power in democracies elections are the primary mechanism for disciplining public officials but they are not sufficient separation of powers between executive and legislative bodies also helps to prevent the abuse of power but only with appropriate checks and balances checks and balances work by creating a conflict of interest between the executive and the legislature yet requiring both bodies to agree on public policy in this way the two bodies discipline each other to the voters advantage under appropriate checks and balances separation of powers also helps the voters elicit information

informational smallness and the scope for limiting information rents abstract for an incomplete information model of public good provision with interim participation constraints we show that efficient outcomes can be approximated with approximately full surplus extraction when there are many agents and each agent is informationally small the result holds even if agents payoffs cannot be unambiguously inferred from their beliefs the contrary result of neeman z neeman the relevance of private information in mechanism design j econ theory 117 2004 55 77 rests on an implicit uniformity requirement that is incompatible with the notion that agents are informationally small because there are many other agents who have information about them

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

implementation in differential information economies abstract we consider the problem of implementation of social choice correspondences in differential information economies we provide necessary conditions for implementation and slightly stronger conditions which are sufficient to guarantee implementation

rank effects in bargaining evidence from government formation theories of multilateral bargaining and coalition formation applied to legislatures predict that parties seat shares determine their bargaining power we present findings that are difficult to reconcile with this prediction but consistent with a norm prescribing that the most voted party should form the government we first present case studies from several countries and regression discontinuity design based evidence from twenty eight national european parliaments we then focus on 2 898 spanish municipal elections in which two parties tie in the number of seats we find that the party with slightly more general election votes is substantially more likely to appoint the mayor since tied parties should on average have equal bargaining power this identifies the effect of being labeled the most voted this effect is comparable to that of obtaining an additional seat and is also present when a right wing party is the most voted and the second and third most voted parties are allied left wing parties who can form a combined majority a model where elections both aggregate information and discipline incumbents can rationalize our results and yields additional predictions we take to the data such as voters punishing second most voted parties that appoint mayors

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

effectiveness of electoral systems for reducing government corruption a game theoretic analysis abstract a theoretical model is developed for predicting the relative effectiveness of different electoral systems for reducing government corruption we consider voting games in which parties with known corruption levels and known positions on a major policy question compete for legislative seats we find that approval voting and proportional representation are fully effective in the sense that all equilibria exclude corrupt parties from legislative seats plurality voting is partly effective in the sense that there always exist some equilibria that exclude corrupt parties borda voting is ineffective because for some political situations no equilibria can guarantee the exclusion of corrupt parties journal of economic literature classification number d72

asymmetric enforcement of cooperation in a social dilemma we use a public good experiment to analyze behavior in a decentralized asymmetric punishment institution the institution is asymmetric in the sense that players differ in the effectiveness of their punishment at the aggregate level we observe remarkable similarities between outcomes in asymmetric and symmetric punishment institutions controlling for the average punishment effectiveness of the institutions we find that asymmetric punishment institutions are as effective in fostering cooperation and are as efficient as symmetric institutions at the individual level we find that players with higher punishment effectiveness contribute similar amounts to the public account but have higher earnings and punish more than their weak counterparts

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

elections coalitions and legislative outcomes predictions of electoral behavior in a multiparty setting should be a function of the voters beliefs about how parties will perform following an election similarly party behavior in a legislature should be a function of electoral promises and rewards we develop a multistage game theoretic model of three party competition under proportional representation the final policy outcome of the game is generated by a noncooperative bargaining game between the parties in the elected legislature this game is essentially defined by the vote shares each party receives in the general election and the parties electoral policy positions at the electoral stage parties and voters are strategic in that they take account of the legislative implications of any electoral outcome we solve for equilibrium electoral positions by the parties and final policy outcomes

surplus extraction and competition a competitive economy is studied in which sellers offer alternative direct mechanisms to buyers who have correlated private information about their valuations in contrast to the monopoly case where sellers charge entry fees and extract all buyers surplus it is shown that in the unique symmetric equilibrium with competition sellers hold second price auctions with reserve prices set equal to their cost most important it is a best reply for sellers not to charge entry fees of the kind normally used to extract surplus even though it is feasible for them to do so

elections governments and parliaments in proportional representation systems this paper presents a theory of parliamentary systems with a proportional representation electoral system a formateur selected based on party representation in parliament and parties that cannot commit to the policies they will implement once in government government formation involves efficient proto coalition bargaining and elections yield unique strong nash equilibrium outcomes depending on the status quo minimal majority surplus or consensus governments can form if parties and voters are myopic and the status quo is subject to shocks consensus governments and centrist policies occur only in a crisis otherwise governments are minimal winning and policies reflect only the preferences of the government parties

a structural model of government formation in this paper we estimate a bargaining model of government formation in parliamentary democracies we use the estimated structural model to conduct constitutional experiments aimed at evaluating the impact of institutional features of the political environment on the duration of the government formation process the type of coalitions that form and their relative stability

uniqueness of equilibrium payoffs in the stochastic model of bargaining abstract i provide a sufficient condition for the uniqueness of equilibrium payoffs in a model of stochastic bargaining with unanimity rule and risk averse players my condition s implies condition c of merlo and wilson 1995 and is easy to verify in applications

high exchange rate volatility and low pass through abstract two specifications of an open economy model are shown to generate high exchange rate volatility and low exchange rate pass through erpt in the model price discrimination causes erpt to be incomplete in both the short and the long run in the short run a small amount of nominal rigidities is enough to reduce erpt sharply still exchange rate depreciation worsens the terms of trade consistent with the evidence possible biases from omitted variables and measurement error in the erpt empirical literature due to data limitations are investigated using model generated time series estimates of erpt coefficients can be quite different from true parameters and are sensitive to the shocks driving the economies estimates can nonetheless detect key structural features of the models

aggregate spending and the terms of trade is there a laursen metzler effect this paper investigates the spending and current account effects of terms of trade shifts in a model where households maximize utility over an infinite planning period in the framework developed here an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated permanent worsening in its terms of trade the paper s model thus provides a setting in which the current account deficit predicted by laursen and metzier harberger and others fails to materialize

government turnover in parliamentary democracies in this paper we consider a dynamic model of government formation and termination in parliamentary democracies that accounts for the following phenomena 1 cabinet terminations due to replacement or early election 2 cabinet reshuf es 3 minority and surplus governments 4 the relative instability of minority governments

an anatomy of u s personal bankruptcy under chapter 13 we build a structural model of chapter 13 bankruptcy that captures salient features of personal bankruptcy under chapter 13 we estimate our model using a novel data set we construct from bankruptcy court dockets recorded in delaware between 2001 and 2002 our estimation results highlight the importance of debtor s choice of repayment plan length on chapter 13 outcomes under the restrictions imposed by the bankruptcy law we use the estimated model to conduct policy experiments to evaluate the impact of more stringent provisions of chapter 13 that impose additional restrictions on the length of repayment plans we nd that these provisions would not

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

radical moderation recapturing power in two party parliamentary systems we estimate the parameters of a reputational game of political competition using data from five two party parliamentary systems we find that latent party preferences and party reputations persist with high probability across election periods with one exception parties with extreme preferences who find themselves out of power switch to moderation with higher probability than the equivalent estimated likelihood for parties in government extreme or moderate or for moderate parties in opposition we find evidence for the presence of significant country specific differences we subject the model to a battery of goodness of fit tests and contrast model predictions with survey and vote margin data not used for estimation finally according to the estimated model parameters australia is less than half as likely to experience extreme policies and australian governments can expect to win more consecutive elections in the long run as compared to their counterparts in greece malta new zealand and the united kingdom

stable governments and the allocation of policy portfolios different members of coalition governments typically have responsibility for different aspects or dimensions of policy such responsibilities are allocated as portfolios to government members given a distribution of such portfolios final government policy is derived as the accumulation of individual members decisions in regard to their respective responsibilities we develop a portfolio allocation model of government formation and policy decision in multiparty legislatures in particular we focus on stable portfolio allocations where a stable allocation is one that yields a policy that no legislative coalition is willing or able to overturn several notions of stability are considered and related to the usual concept of the core among the results are that although stable allocations are not guaranteed such allocations can exist with minority governments and that final policy outcomes associated with stable governments need not be centrist

corporate bankruptcy reorganizations estimates from a bargaining model this article uses a novel approach to measure the unobserved liquidation value of a firm that relies on the information contained in the allocations that are agreed upon in chapter 11 negotiations i estimate a game theoretic model that captures the influence of liquidation value on the equilibrium allocations using a newly collected data set i find that the liquidation values are higher when the industry conditions are more favorable and the real interest rates are higher i use the estimated model to conduct a counterfactual experiment to quantitatively assess the impact of a mandatory liquidation on the equilibrium allocations

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

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

private information in large economies this paper examines the effect of private information in large economies we show that in a model with stochastic information structures the restrictions imposed on allocations by the presence of private information disappear in large economies we also show that for a large class of direct mechanisms the incentive for any agent to falsely report private information goes to zero as the number of agents becomes large these results provide an informational smallness analog to existing quantity smallness limiting results in the literature

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

a simple dynamic general equilibrium model abstract we analyse a single sector economy with h 1 infinitely lived agents that operate in a continuous time framework utility functions are recursive but not additive both efficient and perfect foresight competitive equilibrium allocations are considered the existence and stability of such allocations are investigated locally i e in a neighbourhood of steady state allocations the model is shown to be useful for explaining the distribution of wealth and consumption across agents and for analysing the way in which wealth redistribution can affect the dynamics of aggregate economic variables

asymptotic efficiency in large exchange economies with asymmetric information the authors provide conditions on an exchange economy with asymmetric information that guarantee that when the economy is replicated sufficiently often there will be an allocation that is incentive compatible individually rational and nearly efficient the main theorem covers both the case in which aggregate uncertainty remains when the economy is replicated and the case in which replication eliminates aggregate uncertainty in addition the authors demonstrate how their theorem does or does not apply to standard asymmetric information problems such as the buyer s bid double auction problem akerlof s lemons problem and insurance with asymmetric information copyright 1992 by the econometric society

estimating dynamic games of electoral competition to evaluate term limits in us gubernatorial elections this paper shows how to identify and estimate using standard semi parametric techniques a class of dynamic games with perfect monitoring that have been at the frontier of recent research in political economy the empirical analysis provides novel quantitative insights into the trade off that voters face between ideology and ability the differences in ability and ideology among parties and states and the differences in preferences between political candidates and voters we analyze the consequences of term limits and quantify their relative importance specifically we characterize conditions under which term limits improve voters welfare

the global stability of efficient intertemporal allocations this paper describes a continuous time model of an economy with finitely many infinitely lived consumers and a finite number of capital goods two objectives are achieved first recursive nonadditive utility functionals are formulated and analyzed second these preference functionals are applied to analyze the nature of efficient allocations in a dynamic economy two classes of global turnpike propositions are proven which provide the basis for a model of the long run distribution of wealth these propositions also provide new perspective regarding existing stability literature based on additive utilities copyright 1987 by the econometric society

a drawback of electoral competition in most major democracies there are very few parties compared to the number of possible policy positions held by voters we provide an efficiency rationale for why it might be appropriate to limit the proliferation of parties in our model the larger the number of parties the greater the inefficiency of the outcome of electoral competition the reason is that when the number of parties increases electoral incentives push each party to focus its electoral promises on a narrower constituency and then special interest policies replace more efficient policies that have diffuse benefits the analysis provides a possible explanation for the existence of institutional features that limit the extent of electoral competition thresholds of exclusion runoff electoral systems and majoritarian two party political systems jel d82 l15

the rate of time preference and dynamic economic analysis strong restrictions on the structure of preferences are a central feature in the received theory of intertemporal allocation in fact most of the modern literature concerned with capital theoretic problems represents preferences by a functional in which an additive utility function is discounted by a constant rate of time preference this specification is attractive because it is analytically tractable in dynamic models and it clearly delineates how tastes and opportunities interact to determine an economy s household s paths of consumption and capital formation however its rigid structure constancy of time preference severely limits the conclusions and explanatory power of the corresponding models this paper considers a class of utility functionals in continuous time which have the appealing feature that the rate of time preference depends systematically on an index of aggregate future consumption the more flexible structure embodied in these functionals leads to important generalizations and

money time preference and external balance in monetary economies international differences in rates of time preference do not in general lead to long run trade imbalances in sharp contrast with butter s 119811 results on non monetary overlapping generation economies this claim is documented within the context of a simple two country framework in which new immortal families enter each economy over time with the two countries differing only in their subjective discount rates even if consumers are more impatient at home than abroad trade is balanced in the long run in the presence of valued fiat currencies in constant supply and the current account is indeterminate this abstract was borrowed from another version of this item

optimal growth with decreasing marginal impatience abstract this paper analyses the long run dynamics of a continuous time infinite horizon optimal growth model with identical households where the households rate of time preference is endogenously determined however unlike the existing literature we assume that households have decreasing marginal impatience i e the instantaneous discount rate is negatively related to the current consumption with this assumption we analyse the stability and uniqueness of the long run equilibrium we show that contrary to the general belief a negative relationship between the instantaneous discount rate and the household s current consumption does not necessarily result in instability of the dynamic system however even a stable system may be characterized by multiple equilibria so that the initial condition becomes important in determining the long run behaviour of the economy we derive a set of sufficient conditions for stability and uniqueness in this context

correlated information and mechanism design in models of asymmetric information possession of private information leads to rents for the possessors this induces mechanism designers to distort away from efficiency the authors show that this is an artifact of the presumption that information is independently distributed rent extraction in a large class of mechanism design games is analyzed and a necessary and sufficient condition for arbitrarily small rents to private information is provided additionally the two person bargaining game is shown to have an efficient solution under first order stochastic dominance and a hazard rate condition similar conditions allow full rent extraction in milgrom weber auctions

asymptotic behavior and optimal properties of a consumption investment model with variable time preference abstract this paper analyzes the convergence properties and the determination of an optimal consumption path in the consumption investment model of uzawa 1968 sufficient conditions for the existence and uniqueness of the optimal path are presented components of the utility functional are recovered when the optimal path is piecewise affine the model is applied to the determination of the interest rate and income distribution under time preference differentials

comparative politics and public finance we propose a model with micropolitical foundations to contrast different political regimes compared to a parliamentary regime the institutions of a presidential congressional regime produce fewer incentives for legislative cohesion but more separation of powers these differences are reflected in the size and composition of government spending a parliamentary regime has redistribution toward a majority less underprovision of public goods and more rents to politicians a presidential congressional regime has redistribution toward powerful minorities more underprovision of public goods but less rents to politicians the size of government is smaller under a presidential regime this last prediction is consistent with cross country data

time preference and capital asset pricing models abstract results of the theory of individual optimal consumption investment choice under uncertainty are extended to a class of intertemporally dependent preferences for consumption streams these results are then used to show that with intertemporally dependent preferences which are more realistic than the separable time additive preference structure merton s 1973 multi beta intertemporal capital asset pricing model is still valid but it can no longer be collapsed to breeden s 1979 single consumption beta model

intertemporal dependence impatience and dynamics abstract this paper develops simple geometric methods for analyzing consumer behavior under recursive but intertemporally dependent tastes since the preferences studied need not be time additive they allow the marginal utility of consumption on a given date to vary with consumption on other dates intertemporal dependence is induced by the presence of a variable individual rate of time preference the optimal consumption responses to transitory and anticipated changes in incomes and interest rates are easily derived and are similar in many respects to the responses implied by the standard constant time preference model intuitive explanations of the first order conditions describing optimal paths are provided

the relevance of private information in mechanism design abstract recent results in mechanism design show that as long as agents have correlated private information and are sufficiently risk neutral it is possible to design mechanisms that leave agents with arbitrarily small information rents we show that these full rent extraction results hinge on the implicit assumption that the agents beliefs uniquely determine their preferences we present an example of the voluntary provision of a public good in which this assumption is relaxed and consequently even in highly correlated environments if agents beliefs do not uniquely determine their preferences then the extraction of the agents entire information rents is impossible

a structural model of electoral accountability this paper proposes a structural approach to measuring the eects of electoral ac countability we estimate a political agency model with imperfect information in order to identify and quantify discipline and selection eects using data on u s governors for 1982 2012 we nd that the possibility of reelection provides a signi cant incentive for incumbents to exert eort we also nd a selection eect although it is weaker in terms of its eect on average governor performance according to our model the widely used two term regime improves voter welfare by 4 2 compared to a one term regime and nd that a three term regime may improve voter welfare even further

votes or money theory and evidence from the us congress abstract this paper investigates the relationship between the size of interest groups in terms of voter representation and the interest group s campaign contributions to politicians we uncover a robust hump shaped relationship between the voting share of an interest group and its contributions to a legislator this pattern is rationalized in a simultaneous bilateral bargaining model where the larger size of an interest group affects the amount of surplus to be split with the politician thereby increasing contributions but is also correlated with the strength of direct voter support the group can offer instead of monetary funds thereby decreasing contributions the model yields simple structural equations that we estimate at the district level employing data on individual and pac donations and local employment by sector this procedure yields estimates of electoral uncertainty and politicians effectiveness as perceived by the interest groups our approach also implicitly delivers a novel method for estimating the impact of campaign spending on election outcomes we find that an additional vote costs a politician on average 145

identification and estimation of stochastic bargaining models stochastic sequential bargaining models merlo and wilson 1995 1998 have found wide applications in different fields including political economy and macroeconomics due to their flexibility in explaining delays in reaching an agreement this paper presents new results in nonparametric identification and estimation of such models under different data scenarios

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

is there a broader deeper trade off in international multilateral agreements it is commonly thought that there is a trade off between the breadth and depth of multilateral institutions that is multilaterals that are more inclusive in their memberships will necessarily be shallower in their level of cooperation using a multilateral bargaining model with self seeking rational actors i show that such a trade off does not exist for a broad class of multilateral cooperation problems the conclusion that there is a broader deeper trade off follows from the assumption that the members of the multilateral must set their policies at an identical level the multi lateral agreement modeled in this article allows states to set their policies at different levels once this change is made there is no broader deeper trade off a finding that has obvious empirical and policy implications it explains why some regimes are created with fairly large memberships at the outset and it calls into question the policy prescription of limiting membership of multilateral institutions to a small group of committed cooperators for the class of cooperation problems modeled in this article

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

negotiation in legislatures over government formation we question results claiming to extend non cooperative models of legislative bargaining to the theoretically general and substantively typical case with an arbitrary number of disciplined parties we identify problems with both the derivation of formal results and empirical evaluation of these no empirically robust formateur advantage is observed in field data on bargaining over government formation given this theoretical and empirical impasse we reconsider the substantive premises that should form the foundation for any new attempt to model this fundamental political process arguing that models should be grounded in binding constitutional constraints on the government formation process in parliamentary democracies

demand bargaining and proportional payoffs in majority games abstract we study a majoritarian bargaining model in which players make payoff demands in decreasing order of voting weight the unique subgame perfect equilibrium outcome is such that the minimal winning coalition of the players that move first forms with payoffs proportional to the voting weights this result advances previous analysis in terms of one or more of the following a the simplicity of the extensive form finite horizon with a predetermined order of moves b the range of the majority games covered c the equilibrium concept subgame perfect equilibrium is sufficient for a unique prediction

debt and distortionary taxation in a simple perfect foresight model abstract we examine the real effects of a temporary substitution of debt for distortionary income taxation we find that such a policy may reduce consumption increase investment and reduce interest rates these results arise even though we examine the same model used by barro where temporary substitution of debt for lump sum taxes was shown to have no real effects we show that these anti keynesian effects on consumption are as significant as various pro keynesian effects such as finite lives hence the impact of debt is an empirical issue and ricardian neutrality appears to be a reasonable benchmark

asymmetric information bargaining problems with many agents a yes or no decision must be made about some issue all agents must agree the coase theorem asserts that the efficient outcome will always result suppose the value positive or negative that an individual attaches to an affirmative decision is privately known to that individual it is proved under very mild conditions that with independent types as the number of agents increases the probability of an affirmative efficient decision goes to zero an example in which it is common knowledge that an affirmative decision is efficient and yet the probability of such a decision goes to zero is given

events equilibria and government survival theory a game theoretic model of government formation yields an equilibrium government the robustness of which may be explored by subjecting it to exogenous shocks this permits an examination of government durability and survival in a cruel political world hypotheses the vulnerability of a government to exogenous shocks depends upon the nature of the shock a government may be quite resistant to some classes of shock while it is highly vulnerable to others methods game theoretic analysis yields equilibrium results a simulation technology is crafted which allows us to subject this equilibrium to perturbations of its underlying parameters much in the spirit of wind tunnel experiments in engineering results the technology does indeed allow the systematic examination of well defined cases we find for the case of two european governments in the 1980s and 1990s that they differ considerably in their vulnerability to exogenous shocks

estimating the value of proposal power this paper investigates the role of proposal power in the allocation of transportation projects across u s congressional districts in 1991 and 1998 the evidence supports the key qualitative prediction of legislative bargaining models members with proposal power those sitting on the transportation authorization committee secure more project spending for their districts than do other representatives support for the quantitative restrictions on the value of proposal power is more mixed i then empirically address several alternative models of legislative behavior including partisan models informational roles for committees models with appropriations committees and theories of committees as preference outliers

coalition governments versus minority governments bargaining power cohesion and budgeting outcomes recent empirical work investigating the role of minoritygovernments in the selection of fiscal policies has shown thatthe majority status does not affect the budget size thispaper presents an analytical framework which accounts for thisresult it combines a government formation game and a budgetgame involving cabinet and parliament a general indifferenceresult applies an exogenous shock to the bargaininigenvironment which absorbes the cohesion of the governmentincreases the demand for expenditures at the same time theconditions for the formation of a minority government arefulfilled if the formateur is strong a minority governmentcan be a device for cutting expenditures

a noncooperative theory of legislative coalitions this noncooperative theory is based on a model that incorporates an institutional structure that reflects the sequential process of agenda formation and voting in a legislature that has the task of allocating particularistic benefits among legislative districts the theory is intended to identify the incentives for the formation of proposal coordinating coalitions as a function of characteristics of the political system and the rules that govern agenda formation coalition proposals allocate all the benefits to their districts and whenever the coalition has discipline or controls the chair it will be of minimal winning size when proposals are governed by a closed rule when coalition discipline is absent and the chair is neutral the coalition will be comprised of approximately 70 of the legislature a legislative rule that allows amendments may result in larger coalitions coalition composition is also considered

informational size and incentive compatibility we examine a general equilibrium model with asymmetrically informed agents the presence of asymmetric information generally presents a conflict between incentive com patibility and pareto efficiency we present a notion of informational size and show that the conflict between incentive compatibility and efficiency can be made arbitrarily small if agents are of sufficiently small informational size the incompatibility of pareto efficiency and incentive compatibility is a central theme in economics and game theory the issues associated with this incompatibility are particularly important in the design of resource allocation mechanisms in the presence of asymmetrically informed agents where the need to acquire information from agents in order to compute efficient outcomes and the incentives agents have to misrepresent that information for personal gain come into conflict despite a large literature that focuses on these issues there has been little work aimed at understanding those situations in which informational asymmetries are quantitatively important virtually every transaction is characterized by some asymmetry of information any investor who buys or sells a share of stock generally knows something rel evant to the value of the share that is not known to the person on the other side of the transaction in order to focus on more salient aspects of the problem many models rightly ignore the incentive problems associated with informa tional asymmetries in the belief that for the problem at hand agents are infor mationally small however few researchers have investigated the circumstances under which an analysis that ignores these incentive problems will yield results similar to those obtained when these problems are fully accounted for in this paper we study a class of mechanism design problems our goal is to formalize informational size in a way that when agents are informationally small 1 early versions of this paper circulated under the titles informational smallness and pareto effi ciency and informational smallness and incentive compatibility we thank jacques cremer dean foster andreu mas colell stephen morris david schmeidler and particularly faruk gul for help ful conversations and rajiv vohra for a very careful reading we also thank the numerous partici pants in seminars at which this paper was presented for helpful comments we also thank an editor and the referees for very helpful comments and thank ichiro obara for pointing out an error in an earlier version postlewaite gratefully acknowledges support from the national science foundation

full extraction of the surplus in bayesian and dominant strategy auctions we consider auctions for a single indivisible object in the case where the bidders have information about each other which is not available to the seller we show that the seller can use this information to his own benefit and we completely characterize the environ ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder s willingness to pay we provide this characterization for auctions in which the bidders have dominant strate gies and for those where the relevant equilibrium concept is bayesian nash in both set ups the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties we consider the situation in which an agent the seller possesses one indivisible unit of a good to which he attaches no value but the good has value to a number of potential buyers and its transfer to one of them would increase social welfare in particular the transfer to the buyer with the highest valuation maximizes social welfare in this paper we completely characterize environments in which the seller can design an auction that will enable him to capture for himself the full increase in social welfare induced by the transfer of the good to the bidder with the highest willingness to pay if the seller had full information about the reservation prices of potential buyers his optimal selling strategy would be very simple he would announce a price equal or very close to the highest reservation value the optimal strategy for the bidder with the highest evaluation would be to accept the offer note that we are treating a situation in which the seller can commit himself to a price as a result of the exchange the utility of the seller increases by the full amount of the increase in social welfare and he has been able to fully extract the surplus in many circumstances however a seller has only imperfect knowledge of the buyers willingnesses to pay in this case he must find some mechanism or auction which will enable him to maximize his benefit from the sale of the object the auction literature starts with this observation and shows how the seller can by an astute choice of auction extract the largest possible fraction of the surplus in general the literature has shown that this proportion is strictly less than one in some circumstances the bidders will have information about each other which is not available to the seller for instance in auctions for petroleum drilling rights bidders know the results of geological tests which they have

the permanent income hypothesis and consumption durability analysis based on japanese panel data the permanent income hypothesis with durability of commodities is tested on a panel of about 2 000 japanese households for several commodity groups under static expectations about real interest rates and for some class of utility functions consumption which is a distributed lag function of current and past expenditure follows a martingale main empirical results are i the durability of commodities usually classified as services is substantial ii the hypothesis applies to about 85 percent of the population consisting of wage earners and iii income changes explain only a small fraction of the movements in expenditure

a unified model of cabinet dissolution in parliamentary democracies the literature on cabinet duration is split between two apparently irreconcilable positions the attributes theorists seek to explain cabinet duration as a fixed function of measured explanatory variables while the events process theorists model cabinet durations as a product of purely stochastic processes in this paper we build a unified statistical model that combines the insights of these previously distinct approaches we also generalize this unified model and all previous models by including 1 a stochastic component that takes into account the censoring that occurs as a result of governments lasting to the vicinity of the maximum constitutional interelection period 2 a systematic component that precludes the possibility of negative duration predictions and 3 a much more objective and parsimonious list of explanatory variables the explanatory power of which would not be improved by including a list of indicator variables for individual countries

international lending and borrowing in a stochastic stationary equilibrium this paper develops a simple general equilibrium model of international borrowing and lending in which national products are subject to random fluctuations international capital flows arise from the efforts of risk averse households in different countries to self insure against random income fluctuations by accumulating foreign claims that can be used to finance a less variable profile of consumption relative to national income in the absence of aggregate uncertainty a stationary rational expectations equilibrium is shown to exist despite the fact that rates of time preference differ among countries a number of results many of which enrich those in the existing literature are obtained copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

voting in legislative elections under plurality rule conventional models of single district plurality elections show that with three parties anything can happen extreme policies can win regardless of voter preferences i show that when there are multiple district elections for a legislature we get back to a world where the median voter matters an extreme policy will generally only come about if it is preferred by the median voter in a majority of districts while the existence of a centrist party can lead to moderate outcomes even if the party itself wins few seats furthermore i show that while single district elections always have misaligned voting i e some voters do not vote for their preferred choice equilibria of the legislative election exist with no misaligned voting in any district finally i show that when parties are impatient a xed rule on how legislative bargaining occurs will lead to more coalition governments while uncertainty will favour single party governments

constraints on cabinet formation in parliamentary democracies coalition theory typically treats political parties involved in government formation in parliamentary democracies as if they were unconstrained players in an institution free world yet actual coalition options are often severely constrained by institutional arrangements and prior commitments we develop a systematic account of different constraints on government formation and examine their frequency across 10 parliamentary democracies hypothetical and empirical examples demonstrate how a small number of constraints can dramatically reduce the range of coalition options and redistribute bargaining power among political parties more adequate coalition theories need to recognize the effects of such constraints and to build on the theoretical lessons of the neoinstitutionalist approach to legislative behavior

economic dynamics and government stability in postwar italy in this paper i estimate a duration model of the italian government the main finding of the paper is that the downfall probability of an italian government depends on both political and economic factors in particular the higher the inflation rate and the higher the number of workhours lost in strikes both at the time a government forms and during its tenure in office the more likely it is for a government to collapse this result has important consequences for the validity of political theories of the business cycle