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Competitive equilibrium in Markets for Votes

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

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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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7992.

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Date of creation: Sep 2010
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Handle: RePEc:cpr:ceprdp:7992

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Keywords: Competitive Equilibrium; Experiments; Markets; Vote Trading; Voting;

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References

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  1. Plott, Charles R. & Gray, Peter, 1990. "The multiple unit double auction," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 245-258, March.
  2. Carmen Bevia & Martine Quinzii & JosŽ A. Silva, . "Buying Several Indivisible Goods," Department of Economics 97-20, California Davis - Department of Economics.
  3. Stefano Demichelis & Klaus Ritzberger, 2007. "Corporate Control and the Stock Market," Carlo Alberto Notebooks 60, Collegio Carlo Alberto.
  4. Alessandra Casella, 2002. "Storable Votes," NBER Working Papers 9189, National Bureau of Economic Research, Inc.
  5. Mailath, George J & Postlewaite, Andrew, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 351-67, July.
  6. Engelmann, Dirk & Grimm, Veronika, 2008. "Mechanisms for efficient voting with private information about preferences," IWQW Discussion Paper Series 03/2008, Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW).
  7. Casella, Alessandra & Palfrey, Thomas & Riezman, Raymond, 2008. "Minorities and Storable Votes," International Quarterly Journal of Political Science, now publishers, vol. 3(2), pages 165-200, July.
  8. Forsythe, Robert & Palfrey, Thomas R. & Plott, Charles R., . "Asset Valuation in an Experimental Market," Working Papers 299, California Institute of Technology, Division of the Humanities and Social Sciences.
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  10. Rafael Hortala-Vallve, 2007. "Qualitative Voting," Economics Series Working Papers 320, University of Oxford, Department of Economics.
  11. Klaus Kultti & Hannu Salonen, 2005. "Market for Votes," Homo Oeconomicus, Institute of SocioEconomics, vol. 23, pages 323-332.
  12. Doug Miller & A. Colin Cameron & Jonah B. Gelbach, 2006. "Bootstrap-Based Improvements for Inference with Clustered Errors," Working Papers 621, University of California, Davis, Department of Economics.
  13. 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.
  14. 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.
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  16. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Incentives and incomplete information," CORE Discussion Papers RP -354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Dekel, Eddie & Jackson, Matthew O. & Wolinsky, Asher, 2009. "Vote Buying: Legislatures and Lobbying," International Quarterly Journal of Political Science, now publishers, vol. 4(2), pages 103-128, July.
  18. 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.
  19. Vernon L. Smith, 1965. "Experimental Auction Markets and the Walrasian Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 73, pages 387.
  20. Danilov, Vladimir & Koshevoy, Gleb & Murota, Kazuo, 2001. "Discrete convexity and equilibria in economies with indivisible goods and money," Mathematical Social Sciences, Elsevier, vol. 41(3), pages 251-273, May.
  21. 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.
  22. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
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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. 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.
  3. Casella, Alessandra & Turban, Sébastien, 2012. "Democracy Undone. Systematic Minority Advantage in Competitive Vote Markets," CEPR Discussion Papers 9242, C.E.P.R. Discussion Papers.
  4. 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.
  5. Matias Iaryczower & Santiago Oliveros, 2013. "Power Brokers: Middlemen in Legislative Bargaining," Economics Discussion Papers 731, University of Essex, Department of Economics.

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