Crafting Consensus

Presentado el 22 de mayo de 2013 en el Internal Workshop: Social Choice & Game Theory, de la Unitat de Fonaments de l'Anàlisi Econòmica, UAB, Barcelona (España). Presentado el 3 de abril de 2014 en The 2014 Meeting of the European Public Choice Society, celebrado del 3 al 6 de abril de 2014 en Cambridge (Reino Unido)The paper analyses the problem of a committee chair using favours at her disposal to maximize the likelihood that her proposal gains committee support. The favours increase the probability of a given member approving the chair’s proposal via a smooth voting function. The decision-making protocol is any quota voting rule. The paper characterizes the optimal allocation of any given level of favours and the optimal expenditure minimizing level of favours. The optimal allocation divides favours uniformly among a coalition of the committee members. At a low level of favours, the coalition comprises all committee members. At a high level, it is the minimum winning coalition. The optimal expenditure level guarantees the chair certain support of the minimum winning coalition if favours are abundant and uncertain support of all committee members if favours are scarce; elitist or egalitarian committees are compatible with a strategic chair. The results are robust to changing the chair’s objectives and to alternative voting functionsPeer Reviewe

Dissent voting behavior of central bankers: what do we really know?

Abstract We examine the determinants of the dissent in central bank boards’ voting records about monetary policy rates in the Czech Republic, Hungary, Sweden, the U.K. and the U.S. In contrast to previous studies, we consider about 25 different macroeconomic, financial, institutional, psychological or preference-related factors jointly and deal formally with the attendant model uncertainty using Bayesian model averaging. We find that the rate of dissent is between 5% and 20% in these central banks. Our results suggest that most regressors, including those capturing the effect of inflation and output, are not robust determinants of voting dissent. The difference in central bankers’ preferences is likely to drive the dissent in the U.S. Fed and the Bank of England. For the Czech and Hungarian central banks, average dissent tends to be larger when policy rates are changed. Some evidence is also found that food price volatility tends to increase the voting dissent in the U.S. Fed and in Riksbank.monetary policy, voting record, dissent

Dissent voting behavior of central bankers: what do we really know?

Abstract We examine the determinants of the dissent in central bank boards’ voting records about monetary policy rates in the Czech Republic, Hungary, Sweden, the U.K. and the U.S. In contrast to previous studies, we consider about 25 different macroeconomic, financial, institutional, psychological or preference-related factors jointly and deal formally with the attendant model uncertainty using Bayesian model averaging. We find that the rate of dissent is between 5% and 20% in these central banks. Our results suggest that most regressors, including those capturing the effect of inflation and output, are not robust determinants of voting dissent. The difference in central bankers’ preferences is likely to drive the dissent in the U.S. Fed and the Bank of England. For the Czech and Hungarian central banks, average dissent tends to be larger when policy rates are changed. Some evidence is also found that food price volatility tends to increase the voting dissent in the U.S. Fed and in Riksbank

Dissent voting behavior of central bankers: what do we really know?

Abstract We examine the determinants of the dissent in central bank boards’ voting records about monetary policy rates in the Czech Republic, Hungary, Sweden, the U.K. and the U.S. In contrast to previous studies, we consider about 25 different macroeconomic, financial, institutional, psychological or preference-related factors jointly and deal formally with the attendant model uncertainty using Bayesian model averaging. We find that the rate of dissent is between 5% and 20% in these central banks. Our results suggest that most regressors, including those capturing the effect of inflation and output, are not robust determinants of voting dissent. The difference in central bankers’ preferences is likely to drive the dissent in the U.S. Fed and the Bank of England. For the Czech and Hungarian central banks, average dissent tends to be larger when policy rates are changed. Some evidence is also found that food price volatility tends to increase the voting dissent in the U.S. Fed and in Riksbank

Markovian equilibria in dynamic spatial legislative bargaining: existence with three players

The paper proves, by construction, the existence of Markovian equilibria in a dynamic spatial legislative bargaining model. Three players bargain over one-dimensional policies in an infinite horizon. In each period, a sequential protocol of proposal-making and voting, with random proposer recognitions and a simple majority, produces a policy that becomes the next period's status-quo. An equilibrium exists for any profile of proposer recognition probabilities, any profile of players' ideal policies, and any discount factor. In equilibrium, policies converge to the median's ideal policy, players moderate and propose policies close to the median's ideal in an attempt to constraint future proposers, but the tendency to moderate is a strategic substitute as the opponent of a moderating player does not moderate.Financial support from the Post-Doc Research Fund of Charles University in Prague is gratefully acknowledged.Peer reviewe

Patience in repeated bargaining: Revisiting Muthoo (1999)

The paper shows that Corollary 10.3 in Muthoo’s book Bargaining Theory with Applications (Cambridge University Press, 1999) is incorrect and proves that patience increases a player’s equilibrium share in repeated bargaining situations. It clarifies why a tempting strategy of proof – replacing terms of an expression by approximations with identical limits, then doing comparative statics or taking limits – is flawed and will yield wrong conclusions in other contexts as well.Peer reviewe

Crafting consensus

The paper analyzes the problem of a committee chair using favors at her disposal to maximize the likelihood that her proposal gains committee support. The favors increase the probability of a given member approving the chair’s proposal via a smooth voting function. The decision-making protocol is any quota voting rule. The paper characterizes the optimal allocation of any given level of favors and the optimal expenditure-minimizing level of favors. The optimal allocation divides favors uniformly among a coalition of the committee members. At a low level of favors, the coalition comprises all committee members. At a high level, it is the minimum winning coalition. The optimal expenditure level guarantees the chair certain support of the minimum winning coalition if favors are abundant and uncertain support of all committee members if favors are scarce; elitist or egalitarian committees are compatible with a strategic chair. The results are robust to changing the chair’s objectives and to alternative voting functions, and reconcile theoretical predictions with empirical observations about legislative bargaining experiments, lobby vote buying and executive lawmaking.Financial support by the Czech Science Foundation, grant 14-27902P, is gratefully acknowledged.Peer reviewe

Simple Markovian equilibria in dynamic spatial legislative bargaining

The paper proves, by construction, the existence of Markovian equilibria in a dynamic spatial legislative bargaining model. Players bargain over policies in an infinite horizon. In each period, a sequential protocol of proposal-making and voting, with random proposer recognitions and a simple majority, produces a policy that becomes the next period's status-quo; the status-quo is endogenous. The construction relies on simple strategies determined by strategic bliss points computed by the algorithm we provide. A strategic bliss point, the dynamic utility ideal, is a moderate policy relative to a bliss point, the static utility ideal. Moderation is strategic and germane to the dynamic environment; players moderate in order to constrain the future proposals of opponents. Moderation is a strategic substitute; when a player's opponents do moderate, she does not, and when they do not moderate, she does. We provide conditions under which the simple strategies induced by the strategic bliss points computed by the algorithm deliver a Stationary Markov Perfect equilibrium, and we prove its existence in generic games with impatient players and in symmetric games. Because the algorithm constructs all equilibria in simple strategies, we provide their general characterization, and we show their generic uniqueness.Financial support from the Post-Doc Research Fund of Charles University in Prague is gratefully acknowledged

Gambler's fallacy and imperfect best response in legislative bargaining

We investigate the implications of imperfect best response—in combination with different assumptions about correct (QRE) or incorrect beliefs (Quantal-Gambler’s Fallacy or QGF)—in the alternating offer multilateral bargaining game. We prove that a QRE of this game exists and characterize the unique solution to the proposer’s problem—that is, the proposal observed most frequently in a QRE. We structurally estimate this model on data from laboratory experiments, and show that it explains behavior better than the model with perfect best response: receivers vote probabilistically; proposers allocate resources mostly within a minimum winning coalition of legislators but do not fully exploit their bargaining power and allocate to their coalition partner(s) a disproportionate share of the pie. Incorporating history-dependent beliefs about the future distribution of proposal power into the QRE model (QGF) leads to an even better match with the data, as this model implies slightly lower shares to the proposer, maintaining similar or higher frequencies of minimum winning coalitions and similar voting behavior

Mundell in 3D, synchronization of supply and demand shocks among sectors not countries, with application to CEECs

We follow recent Optimum Currency Area empirical literature and investigate the correlation of supply and demand shocks between the individual new EU member countries and the 'EU-core'. Treating the whole economy as one sector this is a standard exercise based on Mundell's original insight that monetary unification can be welfare improving if (among other things) two or more countries contemplating unification face similar economic disturbances. However, treating the economy of each country as a single sector precludes gaining further insights from the empirical exercise. For this purpose, we propose a novel methodology which treats the economy of each country as a collection of three distinct sectors. This allows us to go beyond the standard results usually presented in the form of international correlation of supply and demand shocks. The methodology combines two pieces of information about each sector in a given economy. The first is the international correlation of sector-specific supply and demand shocks. This information is valuable in itself from the economic policy perspective, as it identifies the most and least internationally synchronized sectors, that is, the sectors that are most and least likely to benefit from monetary unification. The second piece of information is the sector-specific weights used for aggregation across sectors in a given country. While interesting in itself, when combined with the first this piece of information points to sectors that are more and less responsible for the final result one obtains from the empirical exercise. The international correlation of supply and demand shocks is a result common to the standard methodology and our methodology, so the latter can also be seen as a robustness check of the former