Rhetoric in legislative bargaining with asymmetric information

We analyze a three-player legislative bargaining game over an ideological and a distributive decision. Legislators are privately informed about their ideological intensities, i.e., the weight placed on the ideological decision relative to the weight placed on the distributive decision. Communication takes place before a proposal is offered and majority rule voting determines the outcome. We show that it is not possible for all legislators to communicate informatively. In particular, the legislator who is ideologically more distant from the proposer cannot communicate informatively, but the closer legislator may communicate whether he would \compromise "or flight" on ideology. Surprisingly, the proposer may be worse off when bargaining with two legislators (under majority rule) than with one (who has veto power), because competition between the legislators may result in less information conveyed in equilibrium. Despite separable preferences, the proposer is always better off making proposals for the two dimensions together

Rhetoric in Legislative Bargaining with Asymmetric Information

In this paper we analyze a legislative bargaining game in which parties privately informed about their preferences bargain over an ideological and a distributive decision. Communication takes place before a proposal is offered and majority rule voting determines the outcome. When the private information pertains to the ideological intensities but the ideological positions are publicly known, it may not be possible to have informative communication from the legislator who is ideologically distant from the proposer, but the more moderate legislator can communicate whether he would "compromise" or fight" on ideology. If instead the private information pertains to the ideological positions, then all parties may convey whether they will "cooperate," "compromise," or fight" on ideology. When the uncertainty is about ideological intensity, the proposer is always better on making proposals for the two dimensions together despite separable preferences, but when the uncertainty is about ideological positions, bundling can result in informational loss which hurts the proposer.

Strategic Voting over Strategic Proposals, Second Version

Prior research on “strategic voting” has reached the conclusion that unanimity rule is uniquely bad: it results in destruction of information, and hence makes voters worse off. We show that this conclusion depends critically on the assumption that the issue being voted on is exogenous, i.e., independent of the voting rule used. We depart from the existing literature by endogenizing the proposal that is put to a vote, and establish that under many circumstances unanimity rule makes voters better off. Moreover, in some cases unanimity rule also makes the proposing individual better off even when he has diametrically opposing preferences. In this case, unanimity is the Pareto dominant voting rule. Voters prefer unanimity rule because it induces the proposing individual to make a more attractive proposal. The proposing individual prefers unanimity rule because the acceptance probabilities for moderate proposals are higher.Strategic voting; agenda setting; multilateral bargaining

Uniqueness of Stationary Equilibrium Payoffs in Coalitional Bargaining

We study a model of sequential bargaining in which, in each period before an agreement is reached, the proposer’s identity (and whether there is a proposer) are randomly determined; the proposer suggests a division of a pie of size one; each other agent either approves or rejects the proposal; and the proposal is implemented if the set of approving agents is a winning coalition for the proposer. The theory of the fixed point index is used to show that stationary equilibrium expected payoffs of this coalitional bargaining game are unique. This generalizes Eraslan (2002) insofar as: (a) there are no restrictions on the structure of sets of winning coalitions; (b) different proposers may have different sets of winning coalitions; (c) there may be a positive probability that no proposer is selected.

Bicameralism and Government Formation

In this paper we present a structural approach to the study of government formation in multi-party parliamentary democracies. The approach is based on the estimation of a stochastic bargaining model which we use to investigate the effects of specific institutional features of parliamentary democracy on the formation and stability of coalition governments. We then apply our methodology to estimate the effects of governmental bicameralism. Our main findings are that eliminating bicameralism does not affect government durability, but does have a significant effect on the composition of governments leading to smaller coalitions. These results are due to an equilibrium replacement effect: removing bicameralism affects the relative durability of coalitions of different sizes which in turn induces changes in the coalitions that are chosen in equilibrium.Political stability, Government formation, Government dissolution, Bicameralism, Comparative constitutional design

The anatomy of U.S. personal bankruptcy under Chapter 13

By compiling a novel data set from bankruptcy court dockets recorded in Delaware between 2001 and 2002, the authors build and estimate a structural model of Chapter 13 bankruptcy. This allows them to quantify how key debtor characteristics, including whether they are experiencing bankruptcy for the first time, their past-due secured debt at the time of filing, and income in excess of that required for basic maintenance, affect the distribution of creditor recovery rates. The analysis further reveals that changes in debtors' conditions during bankruptcy play a nontrivial role in governing Chapter 13 outcomes, including their ability to obtain a financial fresh start. The authors' model then predicts that the more stringent provisions of Chapter 13 recently adopted, in particular those that force subsets of debtors to file for long-term plans, do not materially raise creditor recovery rates but make discharge less likely for that subset of debtors. This finding also arises in the context of alternative policy experiments that require bankruptcy plans to meet stricter standards in order to be confirmed by the court. ; Also issued as Payment Cards Center Discussion Paper No. 07-16Bankruptcy

Dynamic Agenda Setting

A party in power can address a limited number of issues. What issues to address--the party's agenda--has dynamic implications because it affects what issues will be addressed in the future. We analyze a model in which the incumbent addresses one issue among many and the remaining issues roll over to the next period. We show that no strategic manipulation arises without checks and balances and identify strategic manipulations in the forms of waiting for the moment, seizing the moment, steering, and preemption with checks and balances depending on how power fluctuates. We also discuss efficiency implications

Informational loss in bundled bargaining

We analyze a legislative bargaining game over an ideological and a distributive issue. Legislators are privately informed about their ideological positions. Communication takes place before a proposal is offered and majority-rule voting determines the outcome. We compare the outcome of the ‘bundled bargaining’ game in which the legislators negotiate over both issues together to that of the ‘separate bargaining’ game in which the legislators negotiate over the issues one at a time. Although bundled bargaining allows the proposer to use transfers as an instrument for compromise on the ideological issue, we identify two disadvantages of bundled bargaining under asymmetric information: (i) ‘risk of losing the surplus’ (failure to reach agreement on ideology results in the dissipation of the surplus under bundled bargaining, but not under separate bargaining); (ii) ‘informational loss’ (the legislators may convey less information in the bundled bargaining game). Even when there is no risk of losing the surplus, the informational loss from bundling can be sufficiently large that it makes the proposer worse off

An Anatomy of U.S. Personal Bankruptcy under Chapter 13

We build a structural model that captures salient features of personal bankruptcy under Chapter 13. We estimate our model using a novel data set that we construct from bankruptcies filed in Delaware between 2001 and 2002. Our estimation results highlight the importance of a debtor's choice of repayment plan length on other Chapter 13 outcomes. We use the estimated model to conduct policy experiments to evaluate the impact of more stringent laws that impose restrictions on the length of repayment plans. We find that these provisions would not materially affect creditor recovery rates and would not necessarily make discharge more likely

Some unpleasant bargaining arithmetic?

It is commonly believed that voting rules that are relatively more inclusive (e.g., unanimity or supermajority), are likely to yield relatively more equitable outcomes than simple-majority rule. We show that this is not necessarily the case in bargaining environments. We study a multilateral bargaining model à la Baron and Ferejohn (1989), where players are heterogeneous with respect to the potential surplus they bring to the bargaining table. We show that unanimity rule may generate equilibrium outcomes that are more unequal (or less equitable) than under majority rule. In fact, as players become relatively more patient, we show that the more inclusive the voting rule, the less equitable the equilibrium allocations