Existence and Computation of Pure-strategy Equilibria in Models of Legislative Bargaining with Reconsideration

Diermeier and Fong (2008a) recently proposed a legislative bargaining model with reconsideration in the context of a distributive policy environment. In this paper we prove general existence and necessary conditions for pure-strategy stationary equilibria for any finite policy space and preference profile. We also provide an algorithm to compute these equilibria. In any such equilibrium proposal power is endogenously limited compared to the case of no reconsideration. The general model is then applied to various policy environments, including a model with spatial preferences. In the context of a public goods environment we can show that lack of commitment increases policy efficiency.Legislative bargaining, reconsideration, evolving default, proposal power, lack of commitment, distributive politics, public goods, spatial model.

Endogenous Limits on Proposal Power

We present a dynamic model of legislative bargaining in which policy making proceeds until the proposer has no more incentive to make a new proposal to replace the previously approved policy. We characterize stationary Markov perfect equilibria for the game and show that in all pure-strategy equilibria, a majority of voters without proposal power have an incentive to protect each others' benefits to secure their own long-term bargaining positions in the legislature. As a consequence, the value of proposal power is constrained.Parliamentary democracy, proportional representation, government formation, policy dynamics, lack of commitment, inefficiency.

Endogenous Limits on Proposal Power

This paper presents a dynamic model of election, government formation, and legislation in a parliamentary democracy with proportional representation in which the policy chosen in one period becomes the status quo for the next period. The electorate votes strategically by taking into account the likely governments that parties would form and the policies they would choose as a function of the status quo. The status quo thus affects both the election outcomes and the bargaining power of the parties during government formation. A formateur party thus has incentives to strategically position the current policy to gain an advantage in both the next election and the subsequent bargaining over government formation and policy choice. These incentives can give rise to centrifugal forces that result in policies that are outside the Pareto set of the parties.Legislative bargaining, proposal power, reconsideration, evolving default, distributive politics

of Management, Northwestern University.

Recent theoretical and empirical studies on comparative constitutions have deepened our understanding of how political institutions shape economic policies. Models by Persson and Tabellini (1999), Lizzeri and Persico (2001), and Milesi-Ferretti et al. (2002), for example, compared how different electoral rules lead to different fiscal policie

Policy Dynamics and Inefficiency in a Parliamentary Democracy with Proportional Representation

This paper presents a dynamic model of election, government formation, and legislation in a parliamentary democracy with proportional representation in which the policy chosen in one period becomes the status quo for the next period. The electorate votes strategically by taking into account the likely governments that parties would form and the policies they would choose as a function of the status quo. The status quo also affects the bargaining power of the parties during government formation and their respective policy choices. A formateur party thus has incentives to strategically position the current policy to gain an advantage in both the next election and the subsequent government formation. These incentives can give rise to centrifugal forces that result in policies that are outside the Pareto set of the parties.