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Elections, Contracts and Markets

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Author Info
Gersbach, Hans
Muller, Markus

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Abstract

As the performance of long-term projects is not observable in the short run politicians may pander to public opinion. To solve this problem, we propose a triple mechanism involving political information markets, reelection threshold contracts, and democratic elections. An information market is used to predict the long-term performance of a policy, while threshold contracts stipulate a price level on the political information market that a politician must reach to have the right to stand for reelection. Reelection thresholds are offered by politicians during campaigns. We show that, on balance, the triple mechanism increases social welfare.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5717.

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Date of creation: Jun 2006
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Handle: RePEc:cpr:ceprdp:5717

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Related research
Keywords: democracy; elections; information markets; threshold contracts; triple mechanism;

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Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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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.:
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  15. Gersbach, Hans & Muller, Markus, 2006. "Elections, Contracts and Markets," CEPR Discussion Papers 5717, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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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. Simone Valente, 2007. "International Status Seeking, Trade, and Growth Leadership," Economics working paper series 07/75, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  2. Gersbach, Hans, 2007. "Vote-share Contracts and Democracy," CEPR Discussion Papers 6497, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Urs von Arx & Andreas Schäfer, 2007. "The Influence of Pension Funds on Corporate Governance," Economics working paper series 07/63, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  4. Damian S. Damianov & Johannes Gerd Becker, 2008. "Auctions with Variable Supply: Uniform Price versus Discriminatory," Economics working paper series 08/80, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  5. Hans Gersbach & Maik T. Schneider & Olivier Schneller, 2008. "On the Design of Basic-Research Policy," Economics working paper series 08/79, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  6. Ulrich Brandt-Pollmann & Ralph Winkler & Sebastian Sager & Ulf Moslener & Johannes P. Schlöder, 2006. "Numerical solution of optimal control problems with constant control delays," Economics working paper series 06/59, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  7. Theresa Fahrenberger & Hans Gersbach, 2007. "Minority Voting and Long-term Decisions," Economics working paper series 07/70, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  8. Hans Gersbach & Volker Hahn, 2008. "Forward Guidance for Monetary Policy: Is It Desirable?," Economics working paper series 08/84, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  9. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," Economics working paper series 08/89, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  10. Simone Valente, 2007. "Human Capital, Resource Constraints and Intergenerational Fairness," Economics working paper series 07/68, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  11. Theresa Fahrenberger & Hans Gersbach, 2007. "Legislative Process with Open Rules," Economics working paper series 07/64, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  12. Hans Gersbach & Verena Liessem, 2008. "Reelection threshold contracts in politics," Social Choice and Welfare, Springer, vol. 31(2), pages 233-255, August. [Downloadable!] (restricted)
    Other versions:
  13. Ralph Winkler, 2006. "Now or Never: Environmental Protection under Hyperbolic Discounting," Economics working paper series 06/60, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  14. Hans Gersbach, 2007. "The Global Refunding System and Climate Change," Economics working paper series 07/62, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  15. Christoph Heinzel & Ralph Winkler, 2007. "The role of environmental and technology policies in the transition to a low-carbon energy industry," Economics working paper series 07/71, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  16. Hans Gersbach & Ralph Winkler, 2007. "On the Design of Global Refunding and Climate Change," Economics working paper series 07/69, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jul 2007. [Downloadable!]
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  17. Ian A. MacKenzie,, 2008. "On the Sequential Choice of Tradable Permit Allocations," Economics working paper series 08/83, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  18. Hans Gersbach & Markus Müller, 2006. "Elections, Contracts and Markets," Economics working paper series 06/56, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  19. Volker Hahn, 2007. "Information Acquisition by Price-Setters and Monetary Policy," Economics working paper series 07/73, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  20. Maik T. Schneider, 2007. "Knowledge Codification and Endogenous Growth," Economics working paper series 07/65, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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