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Competitive Equilibrium in Markets for Votes

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  • Alessandra Casella

    ()
    (Columbia University - Department of Economics)

  • Aniol Llorente-Saguer

    ()
    (California Institute of Technology)

  • Thomas R. Palfrey

    ()
    (California Institute of Technology)

Abstract

We develop a competitive equilibrium theory of a market for votes. Before voting on a binary issue, individuals may buy and sell their votes with each other. We define ex ante vote-trading equilibrium, identify weak sufficient conditions for existence, and construct one such equilibrium. We show that this equilibrium must always result in dictatorship and the market generates welfare losses, relative to simple majority voting, if the committee is large enough. We test the theoretical implications by implementing a competitive vote market in the laboratory using a continuous open-book multi-unit double auction.

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Bibliographic Info

Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0910-21.

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Date of creation: 2010
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Handle: RePEc:clu:wpaper:0910-21

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  1. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
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  4. Alessandra Casella & Thomas Palfrey & Raymond Riezman, 2006. "Minorities and Storable Votes," Levine's Bibliography 321307000000000199, UCLA Department of Economics.
  5. Yang, Zaifu, 2000. "Equilibrium in an exchange economy with multiple indivisible commodities and money," Journal of Mathematical Economics, Elsevier, vol. 33(3), pages 353-365, April.
  6. Hortala-Vallve, Rafael & Llorente-Saguer, Aniol, 2010. "A simple mechanism for resolving conflict," Games and Economic Behavior, Elsevier, vol. 70(2), pages 375-391, November.
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  8. Forsythe, Robert & Palfrey, Thomas R & Plott, Charles R, 1982. "Asset Valuation in an Experimental Market," Econometrica, Econometric Society, vol. 50(3), pages 537-67, May.
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  13. Edward C Prescott & Robert M Townsend, 2010. "Pareto Optima and Competitive Equilibria With Adverse Selection and Moral Hazard," Levine's Working Paper Archive 2069, David K. Levine.
  14. Casella, Alessandra, 2005. "Storable votes," Games and Economic Behavior, Elsevier, vol. 51(2), pages 391-419, May.
  15. Carmen Bevia & Martine Quinzii & JosŽ A. Silva, . "Buying Several Indivisible Goods," Department of Economics 97-20, California Davis - Department of Economics.
  16. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
  17. Stefano Demichelis & Klaus Ritzberger, 2007. "Corporate Control and the Stock Market," Carlo Alberto Notebooks 60, Collegio Carlo Alberto.
  18. Plott, Charles R. & Gray, Peter, 1990. "The multiple unit double auction," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 245-258, March.
  19. Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
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  21. Vernon L. Smith, 1965. "Experimental Auction Markets and the Walrasian Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 73, pages 387.
  22. Klaus Kultti & Hannu Salonen, 2005. "Market for Votes," Homo Oeconomicus, Institute of SocioEconomics, vol. 23, pages 323-332.
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Citations

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Cited by:
  1. Alessandra Casella & Thomas Palfrey & Sébastien Turban, 2012. "Vote Trading With and Without Party Leaders," NBER Working Papers 17847, National Bureau of Economic Research, Inc.
  2. Drexl, Moritz & Kleiner, Andreas, 2013. "Preference Intensities in Repeated Collective Decision-Making," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79832, Verein für Socialpolitik / German Economic Association.
  3. Alessandra Casella & Sébastien Turban, 2012. "Democracy Undone. Systematic Minority Advantage in Competitive Vote Markets," NBER Working Papers 18573, National Bureau of Economic Research, Inc.
  4. Matias Iaryczower & Santiago Oliveros, 2013. "Power Brokers: Middlemen in Legislative Bargaining," Economics Discussion Papers 731, University of Essex, Department of Economics.
  5. Scott Duke Kominers & E. Glen Weyl, 2012. "Holdout in the Assembly of Complements: A Problem for Market Design," American Economic Review, American Economic Association, vol. 102(3), pages 360-65, May.

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