A Theory of Political Influence and Economic Organization
I propose a cooperative game theory model of economic reform in a political environment with interest groups. Agents in a better economic position have strategic advantage in formulating economic policy. Agents bargain over policies because they are associated with different income distributions. In this context I examine the robustness of the `Coase Theorem' prediction of efficient bargaining. I use the Aspiration Core and the Aspiration Bargaining Set as solutions to the cooperative game. Even under zero transaction costs, if endogenous coalition formation is allowed, bargaining between interest groups need not result in efficient economic change because the core may be empty. Indeed, I show that there are inefficient equilibrium outcomes if and only if the core is empty.
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- Philip Reny & Eyal Winter & Myrna Wooders, 2012.
"The partnered core of a game with side payments,"
Social Choice and Welfare,
Springer;The Society for Social Choice and Welfare, vol. 39(2), pages 521-536, July.
- Reny,Philip & Winter,Eyal & Wooders,Myrna, "undated". "The partnered core of a game with side payments," Discussion Paper Serie B 258, University of Bonn, Germany.
- Reny, P.J. & Winter, E. & Wooders, M.H., 1993. "The Partenered Core of a Game With Side Payments," UWO Department of Economics Working Papers 9317, University of Western Ontario, Department of Economics.
- Philip J. Reny & Eyal Winter & Myrna Wooders, 2009. "The Partnered Core of a Game with Side Payments," Vanderbilt University Department of Economics Working Papers 0917, Vanderbilt University Department of Economics.
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