What prevents majorities from extracting surplus from minorities in a dynamic legislative process? In this paper we study an infinitely repeated game where legislators determine the division of a surplus each period. A division proposal is made at the beginning of the period by a randomly selected legislator and is then voted on. Proposals that are accepted by a simple majority are implemented, otherwise the status quo allocation prevails. We show existence of a symmetric Markov perfect equilibrium in which more than a minimum winning majority receive a positive allocation for an intermediate range of discount factors. However, the equilibrium outcome is sensitive to initial conditions: compromise is achieved when initial allocations are well distributed, otherwise the equilibrium spirals towards a complete absence of compromise. We find that, contrary to intuition, compromise becomes easier to sustain as the number of legislators increases. Classification-JEL Codes: C73, D74
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Paper provided by Georgetown University, Department of Economics in its series Working Papers with number
gueconwpa~06-06-10.
Length: Date of creation: Date of revision: Handle: RePEc:geo:guwopa:gueconwpa~06-06-10
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