LEGISLATIVE BARGAINING GAMES

Legislative Bargaining Games



Legislative Bargaining Games

Kalandrakis (2004) analyzes an infinitely repeated divide-the-dollar bargaining game with the same bargaining institution, assuming three players with linear utility. The Markov perfect equilibrium in his model is such that irrespective of the discount factor or the initial division of the dollar, the proposer eventually extracts the whole dollar in all periods. In contrast, in the dynamic version of our model, full expropriation by the agenda setter rarely occurs. The distribution is more egalitarian. Bernheim et al (2006) examines legislative policy making in institutions with real-time agenda setting and evolving default.

Assuming finite rounds of proposal-making and voting within a pork barrel model of redistributive politics, the last proposer is able to pass hisfavorite policy under relatively weak conditions. As a consequence, the final policy outcome is highly unequal, and the last proposer is able to obtain his ideal policy. As the authors point out in the concluding section, it is natural to wonder whether particular procedures effectively promote a more egalitarian distribution of political power. Our model keeps the setups of evolving default and real-time legislation, but assumes an agenda setter with persistent power throughout the legislative session and no well-defined last round of negotiation. The new elements work together and substantially limit the extent to which the agenda setter can expropriate the other legislators. This paper is also linked to a recently emerging literature on the role of lack of commitment in policy making. While it is commonly accepted that lack of commitment by the policy maker is a source of inefficiency, our model shows that lack of commitment by the agenda-setter who holds power for a certain amount of time in fact leads to more egalitarian division of social surplus. If we were to introduce some concavity into the legislators' payoff functions, this would imply more efficient policy outcomes.

In most democracies, several distinct issues are sometimes approved in the same bill. At the same time, there are many bills dealing with only one issue at a time. In any legislature we observe a mix of single-issue bills and bundled bills. 1 The previous literature on legislative bargaining or agenda choice, however, remains silent on the reason for the coexistence of both types of proposed bills, and on how to rationalize the choice of bundling versus separating. More precisely, there is no theoretical model that can display separating and bundling of issues as the optimal choices in different contexts or under different parameters. Many previous models of legislative bargaining simply assume bundling as the only option for the agenda setter (e.g. Morelli 1999, Banks and Duggan 2000, 2006). Other models consider the choice of the agenda setter to separate or bundle issues (e.g. Baron and Ferejohn 1989, Jackson and Moselle 2002) but all assume a bargaining game that makes bundling always optimal for the agenda setter. They specifically use the alternating offer games introduced by Baron and Ferejohn (1989). This game yields such a large bargaining power to the agenda setter that ...