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Coalition-Preclusion Contracts and Moderate Policies

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Abstract

We examine the effects of a novel political institution, which we call Coalition- Preclusion Contracts, on elections, policies, and welfare. Coalition-Preclusion Contracts enable political parties to credibly commit before the elections not to form a coalition after the elections with one or several other parties specified in the contract. We consider a political game in which three parties compete to form the government and study when contracts of the above type will be written. We find that in most circumstances Coalition-Preclusion Contracts with a single-party exclusion rule defend the interests of the majority by moderating the policies implemented. Moreover, they yield welfare gains for a large set of parameter values. We discuss the robustness of the results in more general settings and study how party-exclusion rules have to be adjusted when more than three parties compete in an election.

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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 14/195.

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Length: 62 pages
Date of creation: Apr 2014
Date of revision:
Handle: RePEc:eth:wpswif:14-195

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Keywords: coalition formation; political contracts; elections; government formation;

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  1. Marc Debus, 2009. "Pre-electoral commitments and government formation," Public Choice, Springer, vol. 138(1), pages 45-64, January.
  2. Aragones, Enriqueta & Palfrey, Thomas R. & Postlewaite, Andrew, 2006. "Political reputations and campaign promises," Working Papers 1258, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Mehmet Ekmekci, 2008. "Manipulation through political endorsements," Discussion Papers 1509, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Siddhartha Bandyopadhyay & Kalyan Chatterjee, 2006. "Coalition Theory and its Applications: A Survey," Economic Journal, Royal Economic Society, vol. 116(509), pages F136-F155, 02.
  5. Arianna Degan & Antonio Merlo, 2006. "Do Voters Vote Sincerely? Second Version," PIER Working Paper Archive 07-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Jan 2007.
  6. Arianna Degan & Antonio Merlo, 2006. "Do Voters Vote Sincerely?," PIER Working Paper Archive 06-008, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  7. Gersbach, Hans, 2008. "Contractual Democracy," CEPR Discussion Papers 6763, C.E.P.R. Discussion Papers.
  8. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, October.
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