Abstract

http://ssrn.com/abstract=1943695
 


 



Politics With(Out) Coase


Barbara Luppi


Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; University of St. Thomas School of Law

Francesco Parisi


University of Minnesota - Law School; University of Bologna

October 13, 2011

International Review of Economics, Forthcoming
Minnesota Legal Studies Research Paper No. 11-44

Abstract:     
Political markets may be curative of political externalities, yet they are often unviable due to the presence of bargaining externalities. In this paper we study the extent to which the choice of voting dimensions may affect the viability of Coasian bargaining in a political context. The results suggest that bargaining in a multi-dimensional policy space, although desirable in an ideal world of zero-transaction costs, is almost unavoidably affected by bargaining externalities. Disaggregating the policy choices and voting in a one-dimensional policy space can reduce bargaining externalities and lead to median-voter outcomes. Bargaining by a limited number of players in a median-voter situation can achieve a social first-best. We show the equivalence between the outcomes of multiple independent voting in one-dimensional space and the hypothetical outcome of Coasian bargaining in a multi-dimensional policy space.

Number of Pages in PDF File: 21

Keywords: political Coase theorem, political externalities, bargaining externalities, cyclicality

JEL Classification: C70, D23, D60, D80

Accepted Paper Series


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Date posted: October 18, 2011 ; Last revised: March 10, 2012

Suggested Citation

Luppi, Barbara and Parisi, Francesco, Politics With(Out) Coase (October 13, 2011). International Review of Economics, Forthcoming; Minnesota Legal Studies Research Paper No. 11-44. Available at SSRN: http://ssrn.com/abstract=1943695 or http://dx.doi.org/10.2139/ssrn.1943695

Contact Information

Barbara Luppi
Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )
Viale Berengario 51
41100 Modena, Modena 41100
Italy
University of St. Thomas School of Law
MN
United States
Francesco Parisi (Contact Author)
University of Minnesota - Law School ( email )
229 19th Avenue South
Minneapolis, MN 55455
United States
University of Bologna ( email )
Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
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