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Informational Loss in Bundled Bargaining

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  • Ying Chen

    (Arizona State University)

  • Hulya Eraslan

    (Johns Hopkins University)

Abstract

We analyze a legislative bargaining game over an ideological and a distributive issue. Legislators are privately informed about their ideological positions. Communication takes place before a proposal is offered and majority rule voting determines the outcome. We compare the outcome of the "bundled bargaining" game in which the legislators negotiate over both issues together to that of the "separate bargaining" game in which the legislators negotiate over the issues one at a time. Although bundled bargaining allows the proposer to use transfers as an instrument for compromise on the ideological issue, we identify two disadvantages of bundled bargaining under asymmetric information: (i) risk of losing the surplus (failure to reach agreement on ideology results in the dissipation of the surplus under bundled bargaining, but not under separate bargaining); (ii) informational loss (the legislators may convey less information in the bundled bargaining game). Even when there is no risk of losing the surplus, the informational loss from bundling can be sufficiently large that it makes the proposer worse off.

Suggested Citation

  • Ying Chen & Hulya Eraslan, 2012. "Informational Loss in Bundled Bargaining," Koç University-TUSIAD Economic Research Forum Working Papers 1234, Koc University-TUSIAD Economic Research Forum.
    • Handle: RePEc:koc:wpaper:1234
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    References listed on IDEAS

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    Cited by:

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    3. Harstad, Bård, 2023. "Pledge-and-review bargaining," Journal of Economic Theory, Elsevier, vol. 207(C).
    4. Vincent Anesi & Mikhail Safronov, 2023. "Deciding When To Decide: Collective Deliberation And Obstruction," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 757-781, May.
    5. Piazolo, David & Vanberg, Christoph, 2022. "Legislative bargaining with private information: A comparison of majority and unanimity rule," Working Papers 0709, University of Heidelberg, Department of Economics.
    6. Harstad, Bård, 2021. "A Theory of Pledge-and-Review Bargaining," Memorandum 5/2022, Oslo University, Department of Economics, revised 21 Jun 2021.
    7. Louis-Sidois, Charles & Musolff, Leon Andreas, 0. "Buying voters with uncertain instrumental preferences," Theoretical Economics, Econometric Society.
    8. Alan E Wiseman, 2013. "Information and political institutions," Journal of Theoretical Politics, , vol. 25(3), pages 301-308, July.
    9. Peter Bils & William Spaniel, 2017. "Policy bargaining and militarized conflict," Journal of Theoretical Politics, , vol. 29(4), pages 647-678, October.
    10. Chen, Ying & Zápal, Jan, 2022. "Sequential vote buying," Journal of Economic Theory, Elsevier, vol. 205(C).

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