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On Dynamic Compromise

Author

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  • Bowen, T. Renee

    (Stanford University)

  • Zahran, Zaki

    (Research and Innovation Centre, Watson Wyatt Worldwide, London)

Abstract

What prevents majorities from extracting surplus from minorities in legislatures? We study an infinite horizon game where a legislative body votes to determine distributive policy each period. Proposals accepted by a simple majority are implemented, otherwise the status quo allocation prevails. We construct a symmetric Markov perfect equilibrium that exhibits compromise in the following sense: if the initial status quo allocation is "not too unequal", then the Markov process is absorbed into allocations in which more than a minimum winning majority receives a positive share of the social surplus with positive probability. The compromise is only sustainable if, starting from the "unequal" allocations, the Markov process is absorbed into allocations in which there is a complete absence of compromise. The compromise equilibrium exists when discounting is neither too small nor too large. We find that, contrary to intuition, the range of discount factors for which this equilibrium exists increases as the number of legislators increases. In this sense, compromise is easier in larger legislatures.

Suggested Citation

  • Bowen, T. Renee & Zahran, Zaki, 2009. "On Dynamic Compromise," Research Papers 2020, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:2020
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    Cited by:

    1. repec:the:publsh:2215 is not listed on IDEAS
    2. Tasos Kalandrakis, 2010. "Minimum winning coalitions and endogenous status quo," International Journal of Game Theory, Springer;Game Theory Society, vol. 39(4), pages 617-643, October.
    3. Baron, David P. & Bowen, T. Renee & Nunnari, Salvatore, 2017. "Durable coalitions and communication: Public versus private negotiations," Journal of Public Economics, Elsevier, vol. 156(C), pages 1-13.
    4. Pohan Fong, 2008. "Endogenous Limits on Proposal Power," Discussion Papers 1465, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Anesi, Vincent & Duggan, John, 0. "Existence and indeterminacy of markovian equilibria in dynamic bargaining games," Theoretical Economics, Econometric Society.
    6. Roger Lagunoff (Georgetown University), 2005. "Markov Equilibrium in Models of Dynamic Endogenous Political Institutions," Working Papers gueconwpa~05-05-07, Georgetown University, Department of Economics.
    7. Richter, Michael, 2014. "Fully absorbing dynamic compromise," Journal of Economic Theory, Elsevier, vol. 152(C), pages 92-104.
    8. Forand, Jean Guillaume, 2014. "Two-party competition with persistent policies," Journal of Economic Theory, Elsevier, vol. 152(C), pages 64-91.
    9. Marco Battaglini & Thomas Palfrey, 2012. "The dynamics of distributive politics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(3), pages 739-777, April.
    10. Barseghyan, Levon & Coate, Stephen, 2014. "Bureaucrats, voters, and public investment," Journal of Public Economics, Elsevier, vol. 119(C), pages 35-48.
    11. David Baron & Daniel Diermeier & Pohan Fong, 2012. "A dynamic theory of parliamentary democracy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(3), pages 703-738, April.
    12. Tasos Kalandrakis, 2016. "Pareto efficiency in the dynamic one-dimensional bargaining model," Journal of Theoretical Politics, , vol. 28(4), pages 525-536, October.
    13. Jan Zapal, 2014. "Simple Markovian Equilibria in Dynamic Spatial Legislative Bargaining," CERGE-EI Working Papers wp515, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    14. Daniel Diermeier & Pohan Fong, 2011. "Legislative Bargaining with Reconsideration," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 947-985.
    15. Vincent Anesi & John Duggan, 2015. "Dynamic Bargaining and External Stability with Veto Players," Discussion Papers 2015-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    16. repec:eee:gamebe:v:103:y:2017:i:c:p:30-40 is not listed on IDEAS
    17. Vincent Anesi & Daniel J Seidmann, 2012. "Bargaining in Standing Committees," Discussion Papers 2012-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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