Vote Trading with and Without Party Leaders
Columbia University - Graduate School of Arts and Sciences, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
Thomas R. Palfrey
California Institute of Technology - Division of the Humanities and Social Sciences
California Institute of Technology - Economics
NBER Working Paper No. w17847
Two groups of voters of known sizes disagree over a single binary decision to be taken by simple majority. Individuals have different, privately observed intensities of preferences and before voting can buy or sell votes among themselves for money. We study the implication of such trading for outcomes and welfare when trades are coordinated by the two group leaders and when they take place anonymously in a competitive market. The theory has strong predictions. In both cases, trading falls short of full efficiency, but for opposite reasons: with group leaders, the minority wins too rarely; with market trades, the minority wins too often. As a result, with group leaders, vote trading improves over no-trade; with market trades, vote trading can be welfare reducing. All predictions are strongly supported by experimental results.
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Number of Pages in PDF File: 61
Date posted: February 20, 2012
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