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Competitive Equilibrium in Markets for Votes

  • Alessandra Casella

    ()

    (Columbia University, NBER and CEPR)

  • Aniol Llorente-Saguer

    ()

    (Max Planck Institute for Research on Collective Goods, Bonn)

  • Thomas R. Palfrey

    ()

    (Max Planck Institute for Research on Collective Goods, Bonn)

We develop a competitive equilibrium theory of a market for votes. Before voting on a binary issue, individuals may buy and sell their votes with each other. We define the concept of ex ante vote-trading equilibrium, and show by construction that an equilibrium exists. The equilibriumwe characterize always results in dictatorship if there is any trade, and the market for votes generates welfare losses, relative to simple majority voting, if the committee is large enough or the distribution of values not very skewed. We test the theoretical implications by implementing a competitive vote market in the laboratory using a continuous open-book multi-unit double auction.

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Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2012_03.

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Date of creation: Feb 2012
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Handle: RePEc:mpg:wpaper:2012_03
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