A Theory of Political Influence and Economic Organization
AbstractI propose a cooperative game theory model of economic reform in a political environment with interest groups. Agents in a better economic position have strategic advantage in formulating economic policy. Agents bargain over policies because they are associated with different income distributions. In this context I examine the robustness of the `Coase Theorem' prediction of efficient bargaining. I use the Aspiration Core and the Aspiration Bargaining Set as solutions to the cooperative game. Even under zero transaction costs, if endogenous coalition formation is allowed, bargaining between interest groups need not result in efficient economic change because the core may be empty. Indeed, I show that there are inefficient equilibrium outcomes if and only if the core is empty.
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Bibliographic InfoPaper provided by Universidad de Guanajuato, Department of Economics and Finance in its series Department of Economics and Finance Working Papers with number EC200504.
Length: 30 pages
Date of creation: Jan 2005
Date of revision:
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Postal: UCEA-Campus Marfil, Fracc. I, El Establo, Guanajuato GTO 36250
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Web page: http://economia.ugto.org/
More information through EDIRC
Political Economy; Interest Groups; Institutional Change; Coalition Formation; Cooperative Games; Aspiration Solution Concepts;
Find related papers by JEL classification:
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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Vanderbilt University Department of Economics Working Papers
0917, Vanderbilt University Department of Economics.
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- Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
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