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The Dynamics of Distributive Politics

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  • Marco Battaglini
  • Thomas Palfrey

Abstract

We study dynamic committee bargaining over an infinite horizon with discounting. In each period a committee proposal is generated by a random recognition rule, the committee chooses between the proposal and a status quo by majority rule, and the voting outcome in period t becomes the status quo in period t+1. We study symmetric Markov equilibria of the resulting game and conduct an experiment to test hypotheses generated by the theory for pure distributional (divide-the-dollar) environments. In particular, we investigate the effects of concavity in the utility functions, the existence of a Condorcet winning alternative, and the discount factor (committee "impatience"). We report several new findings. Voting behavior is selfish and myopic. Status quo outcomes have great inertia. There are strong treatment effects, that are in the direction predicted by the Markov equilibrium. We find significant evidence of concave utility functions.

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Bibliographic Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1451.

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Date of creation: Jul 2007
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Handle: RePEc:nwu:cmsems:1451

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Web page: http://www.kellogg.northwestern.edu/research/math/
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Keywords: Dynamic bargaining; voting; experiments; divide-the-dollar; committees;

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References

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  1. Tasos Kalandrakis, 2007. "Majority Rule Dynamics with Endogenous Status Quo," Wallis Working Papers WP46, University of Rochester - Wallis Institute of Political Economy.
  2. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
  3. Stephen Coate & Marco Battaglini, 2007. "A Dynamic Theory of Public Spending, Taxation and Debt," 2007 Meeting Papers 573, Society for Economic Dynamics.
  4. G Frechette & J Kagel & M Morelli, 2004. "Behavioral Identification in Coalition Bargaining: An Experimental Analysis of Demand Bargaining and Alternating Offers," Levine's Bibliography 122247000000000006, UCLA Department of Economics.
  5. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2002. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Journal of Economic Theory, Elsevier, vol. 104(1), pages 247-272, May.
  6. Guillaume R. Frechette & John H. Kagel & Massimo Morelli, 2010. "Pork Versus Public Goods: An Experimental Study of Public Good Provision Within a Legislative Bargaining Framework," Economics Working Papers ECO2010/37, European University Institute.
  7. Marina Azzimonti Renzo, 2004. "On the dynamic inefficiency of governments," 2004 Meeting Papers 228, Society for Economic Dynamics.
  8. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  9. Sandra Campo & Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2003. "Semiparametric Estimation of First-price Auctions with Risk Averse Bidders," Working Papers 2003-09, Centre de Recherche en Economie et Statistique.
  10. Guillaume R. Frechette & John H. Kagel & Steven Lehrer, 2000. "Bargaining in Legislatures: An Experimental Investigation of Open versus Closed Amendment Rules," Econometric Society World Congress 2000 Contributed Papers 1515, Econometric Society.
  11. Stephen Coate & Marco Battaglini, 2005. "Inefficiency in Legislative Policy-Making: A Dynamic Analysis," 2005 Meeting Papers 209, Society for Economic Dynamics.
  12. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer, vol. 1(1), pages 9-41, June.
  13. Kalandrakis, Anastassios, 2004. "A three-player dynamic majoritarian bargaining game," Journal of Economic Theory, Elsevier, vol. 116(2), pages 294-322, June.
  14. Marco Battaglini & Stephen Coate, 2008. "Fiscal Policy over the Real Business Cycle: A Positive Theory," NBER Working Papers 14047, National Bureau of Economic Research, Inc.
  15. Frechette, Guillaume R. & Kagel, John H. & Morelli, Massimo, 2005. "Gamson's Law versus non-cooperative bargaining theory," Games and Economic Behavior, Elsevier, vol. 51(2), pages 365-390, May.
  16. Bowen, T. Renee & Zahran, Zaki, 2012. "On dynamic compromise," Games and Economic Behavior, Elsevier, vol. 76(2), pages 391-419.
  17. Diermeier, Daniel & Gailmard, Sean, 2006. "Self-Interest, Inequality, and Entitlement in Majoritarian Decision-Making," International Quarterly Journal of Political Science, now publishers, vol. 1(4), pages 327-350, October.
  18. Marco Battaglini & Salvatore Nunnari & Thomas R. Palfrey, 2010. "Political Institutions and the Dynamics of Public Investment," Carlo Alberto Notebooks 142, Collegio Carlo Alberto.
  19. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
  20. Frechette, Guillaume & Kagel, John H. & Morelli, Massimo, 2005. "Nominal bargaining power, selection protocol, and discounting in legislative bargaining," Journal of Public Economics, Elsevier, vol. 89(8), pages 1497-1517, August.
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Citations

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Cited by:
  1. David Baron & Daniel Diermeier & Pohan Fong, 2012. "A dynamic theory of parliamentary democracy," Economic Theory, Springer, vol. 49(3), pages 703-738, April.
  2. Yves Breitmoser & Jonathan Tan & Daniel Zizzo, 2010. "Understanding perpetual R&D races," Economic Theory, Springer, vol. 44(3), pages 445-467, September.
  3. David Baron & Alexander Hirsch, 2012. "Common agency lobbying over coalitions and policy," Economic Theory, Springer, vol. 49(3), pages 639-681, April.
  4. Vincent Anesi, 2007. "Noncooperative Foundations of Stable Sets in Voting Games," Discussion Papers 2007-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  5. Bowen, T. Renee & Zahran, Zaki, 2009. "On Dynamic Compromise," Research Papers 2020, Stanford University, Graduate School of Business.
  6. Alexander Matros & Wooyoung Lim & Theodore Turocy, 2009. "Raising Revenue With Raffles: Evidence from a Laboratory Experiment," Working Papers 377, University of Pittsburgh, Department of Economics, revised Feb 2009.
  7. Breitmoser, Yves & Tan, Jonathan H.W., 2010. "Generosity in bargaining: Fair or fear?," MPRA Paper 27444, University Library of Munich, Germany.
  8. Francesco Squintani, 2012. "Introduction to the symposium in political economy," Economic Theory, Springer, vol. 49(3), pages 513-519, April.
  9. Daniel Diermeier & Georgy Egorov & Konstantin Sonin, 2013. "Endogenous Property Rights," NBER Working Papers 19734, National Bureau of Economic Research, Inc.
  10. Pohan Fong, 2008. "Endogenous Limits on Proposal Power," Discussion Papers 1465, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Tasos Kalandrakis, 2010. "Minimum winning coalitions and endogenous status quo," International Journal of Game Theory, Springer, vol. 39(4), pages 617-643, October.
  12. Daniel Diermeier & Pohan Fong, 2011. "Legislative Bargaining with Reconsideration," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 947-985.
  13. Baron, David P. & Bowen, T. Renee, 2013. "Dynamic Coalitions," Research Papers 2128, Stanford University, Graduate School of Business.

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