Coalition Formation in Legislative Bargaining

Abstract

, and the 2019 Barcelona Summer Forum for useful comments and discussions. Aviv Caspi and Neelanjan Datta provided outstanding research assistance. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Endogenous Social Connections in Legislatures

“…Let g i,l and g i,j be the links chosen by agent i with agents l and j. Agent i chooses the links solving (7) under the constraint that g i,j ∈ [0, g] for all j ∈ N . It is easy to see that, given (E j (G, ε)) j∈N , problem (7) is concave in g = (g i,1 , ..., g i,n ) and, therefore, it has a unique solution whose necessary and sufficient condition is: g * i,j ≤ (θ i,j ) 1+φ αδE * j φ , satisfied as an equality in an interior solution.…”

“…Related literature As we discussed above, legislative activity typically is modelled as a bargaining protocol in the political economy literature. The classic reference is Baron and Ferejohn [1989], while alternative bargaining protocols have been presented by Austen-Smith and Banks [1988], Morelli [1999], Baron and Diermeier [2001], Seidmann et al [2007], Battaglini [2019], and others. In these works, there is little space for the legislators' social connections.…”

“…While scholars in political science have recognized the relevance of social connections between lawmakers for quite some time, only recently have data availability and advances in network analysis allowed us to move beyond descriptive analyses. 7 The second literature to which our work is connected is the economic literature on the estimation of social networks. The traditional approach in the empirical works on endogenous network formation is to interpret observable social networks as realizations from unknown data generating processes, and use them for estimating the processes.…”

Collective Hold-Up

“…On the one hand, Banks and Duggan (2006) show that in a general version of the Baron Ferejohn model, equilibria will have no delay. 9 On the other hand, several papers have shown that inefficiencies arise when the allocation of power changes over time because of voters behavior (Battaglini and Coate (2008)), when present actions have effects on future available actions (Acemoglu, Egorov, and Sonin (2008)), when players disagree on what to do given the evolving environment (Dziuda and Loeper (2016)), when an agent can act as an intermediary in legislative bargaining (Iaryczower and Oliveros (2016)), or because coalition principals face a trade-off between efficiency and surplus extraction (Battaglini (2019)). We contribute to this literature by highlighting a novel dynamic effect that changes willingness to trade of all players.…”