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A Theory of Political Compromise

Author

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  • Dixit, Avinash K
  • Grossman, Gene
  • Gul, Faruk

Abstract

We study political compromise founded on tacit cooperation. Two political parties must share a fixed pie in each of an infinite sequence of periods. In each period, the party in power has ultimate authority to divide the pie. Power evolves according to a Markov process among a set of political states corresponding to different degrees of political ‘strength’ for the two. The political strength of each party is a state variable, and the game is dynamic, rather than repeated. Allocations in an efficient, sub-game perfect equilibrium do not follow a Markov process. Rather, a party’s share reflects not only its current strength, but also how it got there in the recent history. We characterize the efficient division processes for majority rule and supermajority rule, and ask whether one regime allows greater compromise than the other.

Suggested Citation

  • Dixit, Avinash K & Grossman, Gene & Gul, Faruk, 1998. "A Theory of Political Compromise," CEPR Discussion Papers 1935, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1935
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    Cited by:

    1. Lagunoff, Roger, 2006. "Credible communication in dynastic government," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 59-86, January.
    2. Humberto Llavador, 2006. "Electoral Platforms, Implemented Policies, and Abstention," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 27(1), pages 55-81, August.
    3. Casella, Alessandra, 2005. "Storable votes," Games and Economic Behavior, Elsevier, vol. 51(2), pages 391-419, May.
    4. Dani Rodrik, 2000. "Participatory Politics, Social Cooperation, and Economic Stability," American Economic Review, American Economic Association, vol. 90(2), pages 140-144, May.

    More about this item

    Keywords

    compromise; Dynamic Games; policy-making; Political Parties; Risk Sharing;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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