Unanimity Versus Consensus Bargaining Games: Strategic Delegation and Social Optimality

Decisions on common policies are often the outcome of a bargaining game played by members of a committee. This paper investigates whether policies are socially optimal when the members of a committee are delegates sent by different constituencies. A standard unanimity and a consensus oriented bargaining game are analysed. These games are preceded by a delegation stage in which each constituency chooses its delegate non-cooperatively. Both bargaining games allow for sidepayments that are valuable not only for the delegates but for every citizen in a constituency. It is shown that under unanimity the incentive to strategically delegate the power to bargain induces a bias towards the status-quo. Policies are therefore socially sub-optimal. The consensus bargaining game implements a bargaining solution that has not been described in the existing literature on multilateral bargaining. The game aims at finding the consent of all delegates, but allows for the possibility of implementing a policy even in the case where some delegates oppose. The game captures certain features frequently attributed to decision processes in real world committees such as the German Bundesbank or the Council of the European Union. Moreover, the game is closely related to recent developments in the theory of non-cooperative foundations of cooperative game theory. The game presented in this paper is inspired by a game introduced by Hart and Mas-Colell (1996). In the beginning of the game, a proposal has to be approved by all members of the committee. However, if a consensus cannot be reached, the delegate who induced the failure is excluded from future bargaining. Also under the consensus approach the constituencies choose their delegates strategically. However, the chosen policies are nevertheless socially optimal. Therefore, consensus bargaining can be seen as an attractive decision mechanism for many political and economic institutions.