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Markov Equilibrium in Models of Dynamic Endogenous Political Institutions

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  • Roger Lagunoff

Abstract

This paper examines existence of Markov equilibria in the class of dynamic political games (DPGs). DPGs are dynamic games in which political institutions are endogenously determined each period. The process of change is both recursive and instrumental: the rules for political aggregation at date t+1 are decided by the rules at date t, and the resulting institutional choices do not affect payoffs or technology directly. Equilibrium existence in dynamic political games requires a resolution to a “political fixed point problem” in which a current political rule (e.g., majority voting) admits a solution only if all feasible political rules in the future admit solutions in all states. If the class of political rules is dynamically consistent, then DPGs are shown to admit political fixed points. This result is used to prove two equilibrium existence theorems, one of which implies that equilibrium strategies, public and private, are smooth functions of the economic state. We discuss practical applications that require existence of smooth equilibria.

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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000000876.

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Date of creation: 14 Mar 2007
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Handle: RePEc:cla:levrem:122247000000000876

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Cited by:
  1. William Jack & Roger Lagunoff, 2006. "Social Conflict and Gradual Political Succession: An Illustrative Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(4), pages 703-725, December.
  2. George Egorov & Konstantin Sonin, 2005. "The Killing Game: Reputation and Knowledge in Non-Democratic Succession," Economics Working Papers 0054, Institute for Advanced Study, School of Social Science.
  3. Georgy Egorov & Sergei Guriev & Konstantin Sonin, 2006. "Media Freedom, Bureaucratic Incentives, and the Resource Curse," Working Papers w0063, Center for Economic and Financial Research (CEFIR), revised Jun 2006.
  4. Roger Lagunoff & William Jack, 2004. "Dynamic Enfranchisement," 2004 Meeting Papers 466, Society for Economic Dynamics.
  5. Gradstein, M., 2007. "Institutional Traps and Economic Growth," Cambridge Working Papers in Economics 0769, Faculty of Economics, University of Cambridge.
  6. Tasos Kalandrakis, 2007. "Majority Rule Dynamics with Endogenous Status Quo," Wallis Working Papers WP46, University of Rochester - Wallis Institute of Political Economy.
  7. Georgy Egorov & Konstantin Sonin, 2005. "The Killing Game: Reputation and Knowledge in Politics of Succession," Game Theory and Information 0505003, EconWPA.
  8. John Duggan & Tasos Kalandrakis, 2007. "Dynamic Legislative Policy Making," Wallis Working Papers WP45, University of Rochester - Wallis Institute of Political Economy.
  9. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2010. "Political Selection and Persistence of Bad Governments," The Quarterly Journal of Economics, MIT Press, vol. 125(4), pages 1511-1575, November.

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