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Dynamic Collective Choice with Endogenous Status Quo

Author

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  • Wioletta Dziuda
  • Antoine Loeper

Abstract

This paper analyzes an ongoing bargaining situation in which i) preferences evolve overtime, ii) the interests of individuals are not perfectly aligned, and iii) the previous agreement becomes the next status quo and determines the payoffs until a new agreement is reached. We show that the endogeneity of the status quo exacerbates the players’ conflict of interest and decreases the responsiveness of the bargaining outcome to the environment. Players with arbitrarily similar preferences can behave as if their interests were highly discordant. When players become very patient, the endogeneity of the status quo can bring the negotiations to a complete gridlock. Under mild regularity conditions, fixing the status quo throughout the game via an automatic sunset provision improves welfare. The detrimental effect of the endogeneity of the status quo can also be mitigated by concentrating decision rights, for instance, by lowering the supermajority requirement.

Suggested Citation

  • Wioletta Dziuda & Antoine Loeper, 2010. "Dynamic Collective Choice with Endogenous Status Quo," Discussion Papers 1514, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:1514
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    References listed on IDEAS

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    1. Jinhui H. Bai & Roger Lagunoff, 2011. "On the Faustian Dynamics of Policy and Political Power," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 17-48.
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    5. Vincent Anesi & Daniel J. Seidmann, 2015. "Bargaining in Standing Committees with an Endogenous Default," Review of Economic Studies, Oxford University Press, vol. 82(3), pages 825-867.
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    7. Wioletta Dziuda & Antoine Loeper, 2016. "Dynamic Collective Choice with Endogenous Status Quo," Journal of Political Economy, University of Chicago Press, vol. 124(4), pages 1148-1186.
    8. Anesi, Vincent, 2010. "Noncooperative foundations of stable sets in voting games," Games and Economic Behavior, Elsevier, vol. 70(2), pages 488-493, November.
    9. B. Douglas Bernheim & Antonio Rangel & Luis Rayo, 2006. "The Power of the Last Word in Legislative Policy Making," Econometrica, Econometric Society, vol. 74(5), pages 1161-1190, September.
    10. Richter, Michael, 2014. "Fully absorbing dynamic compromise," Journal of Economic Theory, Elsevier, vol. 152(C), pages 92-104.
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    Cited by:

    1. repec:the:publsh:2215 is not listed on IDEAS
    2. Anesi, Vincent & Duggan, John, 0. "Existence and indeterminacy of markovian equilibria in dynamic bargaining games," Theoretical Economics, Econometric Society.
    3. Facundo Piguillem & Alessandro Riboni, 2015. "Spending-Biased Legislators: Discipline Through Disagreement," The Quarterly Journal of Economics, Oxford University Press, vol. 130(2), pages 901-949.
    4. T. Renee Bowen & Ying Chen & H?lya Eraslan, 2014. "Mandatory versus Discretionary Spending: The Status Quo Effect," American Economic Review, American Economic Association, vol. 104(10), pages 2941-2974, October.
    5. Bowen, T. Renee & Chen, Ying & Eraslan, Hülya & Zápal, Jan, 2017. "Efficiency of flexible budgetary institutions," Journal of Economic Theory, Elsevier, vol. 167(C), pages 148-176.
    6. Christian Roessler & Sandro Shelegia & Bruno Strulovici, 2018. "Collective Commitment," Journal of Political Economy, University of Chicago Press, vol. 126(1), pages 347-380.
    7. Anesi, Vincent & Seidmann, Daniel J., 2014. "Bargaining over an endogenous agenda," Theoretical Economics, Econometric Society, vol. 9(2), May.
    8. Ortner, Juan, 2017. "A theory of political gridlock," Theoretical Economics, Econometric Society, vol. 12(2), May.
    9. Yanlei Ma, 2014. "Income Inequality, Political Polarization and Fiscal Policy Gridlock," 2014 Meeting Papers 547, Society for Economic Dynamics.
    10. Baron, David P. & Bowen, T. Renee, 2013. "Dynamic Coalitions," Research Papers 2128, Stanford University, Graduate School of Business.
    11. Jon X. Eguia & Kenneth A. Shepsle, 2014. "Endogenous Assembly Rules, Senior Agenda Power, and Incumbency Advantage," Bristol Economics Discussion Papers 14/638, Department of Economics, University of Bristol, UK.
    12. Wioletta Dziuda & Antoine Loeper, 2016. "Dynamic Collective Choice with Endogenous Status Quo," Journal of Political Economy, University of Chicago Press, vol. 124(4), pages 1148-1186.
    13. Tasos Kalandrakis, 2016. "Pareto efficiency in the dynamic one-dimensional bargaining model," Journal of Theoretical Politics, , vol. 28(4), pages 525-536, October.
    14. 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.
    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:spr:sochwe:v:49:y:2017:i:3:d:10.1007_s00355-016-0989-5 is not listed on IDEAS
    17. Juan Ortner, 2014. "Political Bargaining in a Changing World," 2014 Meeting Papers 445, Society for Economic Dynamics.

    More about this item

    Keywords

    Dynamic voting; endogenous status quo; supermajority; partisanship; polarization; policy inertia; sunset provision JEL Classification Numbers: C73; D72; D78;

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