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Bargaining over governments in a stochastic environment

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Author Info
Merlo, Antonio

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Abstract

In this paper we structurally estimate a game-theoretic model of government formation in a multiparty parliamentary democracy. We focus on the timing and the terms of government agreements in the context of a multilateral stochastic model of sequential bargaining with complete information (Merlo and Wilson (1194, 1995)) where efficient delays may occur in the unique equilibrium. Besides showing that our model yields a good fit to the data on the duration of negotiations over government formation as well as government durations in postwar Italy, we use our estimates to quantify the advantage to proposing and to conduct policy experiments to evaluate the effects of changes in the bargaining procedure. We show that the gains from proposing tend to be quite large. Also, we show that changes in the proposer selection process would not affect either the duration of negotiations or government durations, while the imposition of a strict deadline would in general reduce the incentives to delay agreement as well as government durations.

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Paper provided by University of Minnesota, Economic Development Center in its series Bulletins with number 7476.

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Date of creation: 1996
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Handle: RePEc:ags:umedbu:7476

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Related research
Keywords: noncooperative bargaining; delay; government formation; structural estimation; duration models.; Political Economy; C41; C51; C73; C78; D72;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Muthoo, Abhinay, 1990. "Bargaining without commitment," Games and Economic Behavior, Elsevier, vol. 2(3), pages 291-297, September. [Downloadable!] (restricted)
  2. Kennan, John, 1995. "Repeated contract negotiations with private information," Japan and the World Economy, Elsevier, vol. 7(4), pages 447-472, November. [Downloadable!] (restricted)
  3. Eckstein, Zvi & Wolpin, Kenneth I, 1995. "Duration to First Job and the Return to Schooling: Estimates from a Search-Matching Model," Review of Economic Studies, Blackwell Publishing, vol. 62(2), pages 263-86, April. [Downloadable!] (restricted)
    Other versions:
  4. Austen-Smith, David & Banks, Jeffrey., 1987. "Elections, Coalitions, and Legislative Outcomes," Working Papers 643, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  5. Antonio Merlo & Charles Wilson, 1997. "Efficient delays in a stochastic model of bargaining," Economic Theory, Springer, vol. 11(1), pages 39-55. [Downloadable!] (restricted)
  6. Merlo, Antonio, 1991. "An Econometric Analysis of Government Tenure Histories: The Italian Case," Working Papers 91-28, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  7. James J. Heckman & Christopher J. Flinn, 1982. "New Methods for Analyzing Structural Models of Labor Force Dynamics," NBER Working Papers 0856, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January. [Downloadable!] (restricted)
  9. Harrington, Joseph Jr., 1986. "A non-cooperative bargaining game with risk averse players and an uncertain finite horizon," Economics Letters, Elsevier, vol. 20(1), pages 9-13. [Downloadable!] (restricted)
  10. Sakovics Jozsef, 1993. "Delay in Bargaining Games with Complete Information," Journal of Economic Theory, Elsevier, vol. 59(1), pages 78-95, February. [Downloadable!] (restricted)
  11. Lippman, Steven A. & McCall, John J., 1976. "Job search in a dynamic economy," Journal of Economic Theory, Elsevier, vol. 12(3), pages 365-390, June. [Downloadable!] (restricted)
  12. Kennan, John & Wilson, Robert, 1989. "Strategic Bargaining Models and Interpretation of Strike Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S87-130, Supplemen. [Downloadable!] (restricted)
  13. Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers 0857, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Kennan, John & Wilson, Robert, 1993. "Bargaining with Private Information," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 45-104, March. [Downloadable!] (restricted)
    Other versions:
  15. Merlo, Antonio & Wilson, Charles A, 1995. "A Stochastic Model of Sequential Bargaining with Complete Information," Econometrica, Econometric Society, vol. 63(2), pages 371-99, March. [Downloadable!] (restricted)
  16. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March. [Downloadable!] (restricted)
    Other versions:
  17. Baron, David P & Ferejohn, John, 1987. "Bargaining and Agenda Formation in Legislatures," American Economic Review, American Economic Association, vol. 77(2), pages 303-09, May. [Downloadable!] (restricted)
  18. Del Boca, Daniela & Flinn, Christopher J., 1991. "Cooperation Between Divorced Parents and Compliance with Child Support Orders," Working Papers 91-68, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Massimo Morelli & Michele Tertilt, 2000. "Policy Stability under Different Electoral Systems," Working Papers 00-13, Ohio State University, Department of Economics. [Downloadable!]
  2. Carlos Diaz-Moreno & Jose E. Galdon-Sanchez, 2000. "Collective Bargaining under Complete Information," STICERD - Theoretical Economics Paper Series 401, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  3. Antonio Merlo & Daniel Diermeier & Hülya Eraslan, 2004. "Bicameralism and Government Formation," Working Papers 2004.81, Fondazione Eni Enrico Mattei. [Downloadable!]
  4. Daniel Diermeier & Hulya Eraslan & Antonio Merlo, 2002. "Bicameralism and Government Formation, Second Version," PIER Working Paper Archive 07-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Feb 2007. [Downloadable!]
  5. Bloch, Francis & Rottier, StŽphane, 1999. "Agenda Control in Coalition Formation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
    Other versions:
  6. Eraslan, H. & Merlo, A., 2000. "Majority Rule in a Stochastic Model of Bargaining," Working Papers 00-05, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
    Other versions:
  7. Gerald Pech, 2004. "Coalition Governments Versus Minority Governments: Bargaining Power, Cohesion and Budgeting Outcomes," Public Choice, Springer, vol. 121(1), pages 1-24, October. [Downloadable!] (restricted)
  8. Daniel Diermeier & Hulya Eraslan & Antonio Merlo, 2003. "The Effects of Constitutions on Coalition Governments in Parliamentary Democracies," PIER Working Paper Archive 03-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  9. Antonio Merlo, 2005. "Whither Political Economy? Theories, Facts and Issues," PIER Working Paper Archive 05-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Dec 2005. [Downloadable!]
  10. Gerald Pech, 2001. "Government Formation, Budget Negotiations and Re-election Uncertainty: The Cases of Minority and Majority Coalition Governments," CRIEFF Discussion Papers 0115, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
  11. repec:bep:eaptop:v:7:y:2007:i:1:p:1605-1605 is not listed on IDEAS
  12. John Duggan & Tasos Kalandrakis, 2007. "Dynamic Legislative Policy Making," Wallis Working Papers WP45, University of Rochester - Wallis Institute of Political Economy. [Downloadable!]
  13. repec:att:wimass:1920012 is not listed on IDEAS
  14. Sven de Vries & Rakesh Vohra, 2000. "A Structural Model of Government Formation," Discussion Papers 1297, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  15. Brian Knight, 2004. "Bargaining in Legislatures: An Empirical Investigation," NBER Working Papers 10530, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Yasutora Watanabe & Takanori Adachi, 2004. "Ministerial Weights and Government Formation: Estimation Using a Bargaining Model," Econometric Society 2004 Far Eastern Meetings 742, Econometric Society. [Downloadable!]
  17. Daniel Diermeier & Antoni Merlo, 1999. "An Empirical Investigation of Coalitional Bargaining Procedures," Discussion Papers 1267, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  18. Banks, Jeffrey S. & Duggan, John, 2003. "A bargaining model of legislative policy-making," Working Papers 1162, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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