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Competitive equilibrium in Markets for Votes

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  • Casella, Alessandra
  • Palfrey, Thomas R
  • Llorente-Saguer, Aniol

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 the concept of 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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  • Casella, Alessandra & Palfrey, Thomas R & Llorente-Saguer, Aniol, 2010. "Competitive equilibrium in Markets for Votes," CEPR Discussion Papers 7992, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7992
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    Cited by:

    1. Wagner, Alexander K. & Granic, Dura-Georg, 2017. "Tie-Breaking Power in Committees," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168187, Verein für Socialpolitik / German Economic Association.
    2. Drexl, Moritz & Kleiner, Andreas, 2013. "Preference Intensities in Repeated Collective Decision-Making," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79832, Verein für Socialpolitik / German Economic Association.
    3. Casella, Alessandra & Turban, Sébastien, 2014. "Democracy undone. Systematic minority advantage in competitive vote markets," Games and Economic Behavior, Elsevier, vol. 88(C), pages 47-70.
    4. repec:esx:essedp:731 is not listed on IDEAS
    5. Anand Murugesan & Jean-Robert Tyran, 2023. "The Puzzling Practice of Paying “Cash for Votes”," CESifo Working Paper Series 10504, CESifo.
    6. Laurent Bouton & Aniol Llorente-Saguer & Antonin Macé & Adam Meirowitz & Shaoting Pi & Dimitrios Xefteris, 2022. "Public Information as a Source of Disagreement Among Shareholders," NBER Working Papers 30757, National Bureau of Economic Research, Inc.
    7. Alessandra Casella & Antonin Macé, 2021. "Does Vote Trading Improve Welfare?," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 57-86, August.
    8. Xefteris, Dimitrios & Ziros, Nicholas, 2018. "Strategic vote trading under complete information," Journal of Mathematical Economics, Elsevier, vol. 78(C), pages 52-58.
    9. Jon X. Eguia & Dimitrios Xefteris, 2021. "Implementation by Vote-Buying Mechanisms," American Economic Review, American Economic Association, vol. 111(9), pages 2811-2828, September.
    10. Dimitrios Xefteris & Nicholas Ziros, 2017. "Strategic Vote Trading in Power Sharing Systems," American Economic Journal: Microeconomics, American Economic Association, vol. 9(2), pages 76-94, May.
    11. Chakravarty, Surajeet & Kaplan, Todd R. & Myles, Gareth, 2018. "When costly voting is beneficial," Journal of Public Economics, Elsevier, vol. 167(C), pages 33-42.
    12. Goeree, Jacob K. & Zhang, Jingjing, 2017. "One man, one bid," Games and Economic Behavior, Elsevier, vol. 101(C), pages 151-171.
    13. Iaryczower, Matias & Oliveros, Santiago, 2016. "Power brokers: Middlemen in legislative bargaining," Journal of Economic Theory, Elsevier, vol. 162(C), pages 209-236.
    14. Casella, Alessandra & Palfrey, Thomas & Turban, Sébastien, 2014. "Vote trading with and without party leaders," Journal of Public Economics, Elsevier, vol. 112(C), pages 115-128.
    15. Nikolas Tsakas & Dimitrios Xefteris & Nicholas Ziros, 2021. "Vote Trading in Power-Sharing Systems: A Laboratory Investigation," The Economic Journal, Royal Economic Society, vol. 131(636), pages 1849-1882.
    16. Casella, Alessandra & Macé, Antonin, 2020. "Does Vote Trading Improve Welfare?," CEPR Discussion Papers 15201, C.E.P.R. Discussion Papers.
    17. Azar, José & Schmalz, Martin & Tecu, Isabel, 2017. "Anti-Competitive Effects of Common Ownership," IESE Research Papers D/1169, IESE Business School.
    18. 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 360-365, May.
    19. Kwiek, Maksymilian & Marreiros, Helia & Vlassopoulos, Michael, 2016. "An experimental study of voting with costly delay," Economics Letters, Elsevier, vol. 140(C), pages 23-26.
    20. Malenko, Nadya & Levit, Doron & Maug, Ernst, 2021. "The voting premium," CEPR Discussion Papers 15718, C.E.P.R. Discussion Papers.
    21. Bol, Damien & Matakos, Konstantinos & Troumpounis, Orestis & Xefteris, Dimitrios, 2019. "Electoral rules, strategic entry and polarization," Journal of Public Economics, Elsevier, vol. 178(C).

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    More about this item

    Keywords

    Competitive equilibrium; Experiments; Markets; Vote trading; Voting;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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