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Dynamic Coalitions

Author

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  • Baron, David P.

    (Stanford University)

  • Bowen, T. Renee

    (Stanford University)

Abstract

Policy-making is a dynamic process in which policies can be changed in each period but continue in the absence of new legislation. We study a dynamic legislative bargaining game with an endogenous status quo where in each period a dollar is allocated with a proposal voted against the allocation in the previous period. We characterize for any initial status quo a class of simple Markov perfect equilibria (MPE) with dynamic coalitions, where a dynamic coalition is a decisive set of legislators whose members support the same policy, or set of policies, in at least two consecutive periods. In the basic model a dynamic coalition persists throughout the game, and coalition members share the dollar equally in every period. If uncertainty is associated with the implementation of a policy, there is a continuum of allocations supported by coalition MPE in which the originator of the coalition receives a share larger than the coalition partner receives but smaller than in sequential legislative bargaining theory. These coalition equilibria have the same allocation in every period when the coalition persists, but with positive probability the coalition dissolves due to the uncertainty. Coalition MPE also exists in which members tolerate a degree of implementation uncertainty resulting in coalition allocations that can change from one period to the next. The dynamic coalitions are minimal winning, form in the first period, and, if a coalition dissolves, a new coalition is formed in the next period. The predictions of the theory are compared to experiment results.

Suggested Citation

  • Baron, David P. & Bowen, T. Renee, 2013. "Dynamic Coalitions," Research Papers 2128, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:2128
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    References listed on IDEAS

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    Cited by:

    1. Asghar Zardkoohi & Joseph S. Harrison & Mathew A. Josefy, 2017. "Conflict and Confluence: The Multidimensionality of Opportunism in Principal–Agent Relationships," Journal of Business Ethics, Springer, vol. 146(2), pages 405-417, December.
    2. Agranov, Marina & Cotton, Christopher & Tergiman, Chloe, 2020. "Persistence of power: Repeated multilateral bargaining with endogenous agenda setting authority," Journal of Public Economics, Elsevier, vol. 184(C).
    3. Daniel Diermeier & Georgy Egorov & Konstantin Sonin, 2017. "Political Economy of Redistribution," Econometrica, Econometric Society, vol. 85, pages 851-870, May.
    4. Anesi, Vincent & Duggan, John, 2018. "Existence and indeterminacy of markovian equilibria in dynamic bargaining games," Theoretical Economics, Econometric Society, vol. 13(2), May.
    5. Howell, William & Shepsle, Kenneth & Wolton, Stephane, 2020. "Executive Absolutism: A Model," MPRA Paper 98221, University Library of Munich, Germany.
    6. Vincent Anesi, 2018. "Dynamic Legislative Policy Making under Adverse Selection," Discussion Papers 2018-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    7. Nunnari, Salvatore, 2021. "Dynamic legislative bargaining with veto power: Theory and experiments," Games and Economic Behavior, Elsevier, vol. 126(C), pages 186-230.
    8. T. Renee Bowen & Ying Chen & H?lya Eraslan, 2014. "Mandatory versus Discretionary Spending: The Status Quo Effect," American Economic Review, American Economic Association, vol. 104(10), pages 2941-2974, October.
    9. Baron, David P. & Bowen, T. Renee & Nunnari, Salvatore, 2017. "Durable coalitions and communication: Public versus private negotiations," Journal of Public Economics, Elsevier, vol. 156(C), pages 1-13.
    10. Bowen, T. Renee & Anesi, Vincent, 2018. "Policy Experimentation, Redistribution and Voting Rules," CEPR Discussion Papers 12797, C.E.P.R. Discussion Papers.
    11. Marina Agranov & Christopher Cotton & Chloe Tergiman, 2016. "Persistence Of Power: Repeated Multilateral Bargaining," Working Paper 1374, Economics Department, Queen's University.
    12. Bowen, T. Renee & Chen, Ying & Eraslan, Hülya & Zápal, Jan, 2017. "Efficiency of flexible budgetary institutions," Journal of Economic Theory, Elsevier, vol. 167(C), pages 148-176.
    13. Hülya Eraslan & Kirill S. Evdokimov & Jan Zápal, 2022. "Dynamic Legislative Bargaining," Springer Books, in: Emin Karagözoğlu & Kyle B. Hyndman (ed.), Bargaining, chapter 0, pages 151-175, Springer.
    14. Eguia, Jon X. & Shepsle, Kenneth A., 2016. "Legislative Bargaining with Endogenous Rules," CAGE Online Working Paper Series 281, Competitive Advantage in the Global Economy (CAGE).
    15. Zapal, Jan, 2020. "Simple Markovian equilibria in dynamic spatial legislative bargaining," European Journal of Political Economy, Elsevier, vol. 63(C).
    16. Tasos Kalandrakis, 2016. "Pareto efficiency in the dynamic one-dimensional bargaining model," Journal of Theoretical Politics, , vol. 28(4), pages 525-536, October.
    17. Marina Azzimonti & Laura Karpuska & Gabriel Mihalache, 2020. "Bargaining over Mandatory Spending and Entitlements," Department of Economics Working Papers 20-02, Stony Brook University, Department of Economics.
    18. Marina Azzimonti & Gabriel P. Mihalache & Laura Karpuska, 2020. "Bargaining over Taxes and Entitlements," NBER Working Papers 27595, National Bureau of Economic Research, Inc.
    19. Mallucci, Paola & Wu, Diana Yan & Cui, Tony Haitao, 2019. "Social motives in bilateral bargaining games: How power changes perceptions of fairness," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 138-152.
    20. Anesi, Vincent & Duggan, John, 2017. "Dynamic bargaining and stability with veto players," Games and Economic Behavior, Elsevier, vol. 103(C), pages 30-40.

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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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