Dynamic Legislative Bargaining with Veto Power: Theory and Experiments

In many domains, committees bargain over a sequence of policies and a policy remains ine?ectuntilanewagreementisreached. Inthispaper,Iarguethat,inordertoassess the consequences of veto power, it is important to take into account this dynamic aspect. I analyze an in?nitely repeated divide-the-dollar game with an endogenous status quo policy. I show that, irrespective of legislators patience and the initial division of resources, policy eventually gets arbitrarily close to full appropriation by the veto player; that increasing legislators patience or decreasing the veto players ability to set the agenda makes convergence to this outcome slower; and that the veto player supports reforms that decrease his allocation. These results stand in sharp contrast to the properties of models where committees bargain over a single policy. The main predictions of the theory ?nd support in controlled laboratory experiments. JEL Classi?cations: C72, C73, C78, C92, D71, D72, D78 Keywords: DynamicLegislativeBargaining; DistributivePolitics; StandingCommittees; Endogenous Status Quo; Veto Power; Markov Perfect Equilibrium; Laboratory Experiments