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Competitive Equilibrium in Markets for Votes

  • Alessandra Casella
  • Aniol Llorente-Saguer
  • Thomas R. Palfrey

We develop a competitive equilibrium theory of a market for votes. Before voting on a binary issue, individuals may buy and sell their votes with each other. We define the concept of ex ante vote-trading equilibrium and show by construction that an equilibrium exists. The equilibrium we characterize always results in dictatorship if there is any trade, and the market for votes generates welfare losses, relative to simple majority voting, if the committee is large enough or the distribution of values is not very skewed. We test the theoretical implications in the laboratory using a continuous open-book multiunit double auction.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 661465000000000143.

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Date of creation: 03 Sep 2010
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Handle: RePEc:cla:levarc:661465000000000143
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  1. Casella, Alessandra & Palfrey, Thomas R & Riezman, Raymond, 2005. "Minorities and Storable Votes," CEPR Discussion Papers 5278, C.E.P.R. Discussion Papers.
  2. Edward C Prescott & Robert M Townsend, 2010. "Pareto Optima and Competitive Equilibria With Adverse Selection and Moral Hazard," Levine's Working Paper Archive 2069, David K. Levine.
  3. Engelmann, Dirk & Grimm, Veronika, 2008. "Mechanisms for efficient voting with private information about preferences," IWQW Discussion Paper Series 03/2008, Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW).
  4. Vernon L. Smith, 1965. "Experimental Auction Markets and the Walrasian Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 73, pages 387.
  5. Alessandra Casella, 2002. "Storable Votes," NBER Working Papers 9189, National Bureau of Economic Research, Inc.
  6. Doug Miller & A. Colin Cameron & Jonah B. Gelbach, 2006. "Bootstrap-Based Improvements for Inference with Clustered Errors," Working Papers 621, University of California, Davis, Department of Economics.
  7. Carmen Bevia & Martine Quinzii & JosŽ A. Silva, . "Buying Several Indivisible Goods," Department of Economics 97-20, California Davis - Department of Economics.
  8. Forsythe, Robert & Palfrey, Thomas R & Plott, Charles R, 1982. "Asset Valuation in an Experimental Market," Econometrica, Econometric Society, vol. 50(3), pages 537-67, May.
  9. Stefano Demichelis & Klaus Ritzberger, 2007. "Corporate Control and the Stock Market," Carlo Alberto Notebooks 60, Collegio Carlo Alberto.
  10. Rafael Hortala-Vallve, 2012. "Qualitative voting," Journal of Theoretical Politics, , vol. 24(4), pages 526-554, October.
  11. Hortala-Vallve, Rafael & Llorente-Saguer, Aniol, 2010. "A simple mechanism for resolving conflict," Games and Economic Behavior, Elsevier, vol. 70(2), pages 375-391, November.
  12. Mailath, George J & Postlewaite, Andrew, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 351-67, July.
  13. Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
  14. Yang, Zaifu, 2000. "Equilibrium in an exchange economy with multiple indivisible commodities and money," Journal of Mathematical Economics, Elsevier, vol. 33(3), pages 353-365, April.
  15. Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2004. "Vote Buying," Discussion Papers 1386, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2005. "Vote Buying," Others 0503006, EconWPA.
    • Jackson, Matthew O. & Dekel, Eddie & Wolinsky, Asher, 2005. "Vote buying," Working Papers 1215, California Institute of Technology, Division of the Humanities and Social Sciences.
  16. Klaus Kultti & Hannu Salonen, 2005. "Market for Votes," Homo Oeconomicus, Institute of SocioEconomics, vol. 23, pages 323-332.
  17. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
  18. Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
  19. 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.
  20. Danilov, Vladimir & Koshevoy, Gleb & Murota, Kazuo, 2001. "Discrete convexity and equilibria in economies with indivisible goods and money," Mathematical Social Sciences, Elsevier, vol. 41(3), pages 251-273, May.
  21. Plott, Charles R. & Gray, Peter, 1990. "The multiple unit double auction," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 245-258, March.
  22. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  23. Dekel, Eddie & Jackson, Matthew O. & Wolinsky, Asher, 2009. "Vote Buying: Legislatures and Lobbying," Quarterly Journal of Political Science, now publishers, vol. 4(2), pages 103-128, July.
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