Coalition Formation in Non-Democracies
Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
Northwestern University - Kellogg School of Management; NBER
University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; Higher School of Economics; Centre for Economic Policy Research (CEPR)
September 14, 2009
MIT Department of Economics Working Paper No. 06-33
Review of Economic Studies, Vol. 75, No. 4, pp. 987-1009, 2008
We study the formation of a ruling coalition in nondemocratic societies where institutions do not enable political commitments. Each individual is endowed with a level of political power. The ruling coalition consists of a subset of the individuals in the society and decides the distribution of resources. A ruling coalition needs to contain enough powerful members to win against any alternative coalition that may challenge it and it needs to be self-enforcing, in the sense that none of its subcoalitions should be able to secede and become the new ruling coalition. We present both an axiomatic approach that captures these notions and determines a (generically) unique ruling coalition and the analysis of a dynamic game of coalition formation that encompasses these ideas. We establish that the subgame perfect equilibria of the coalition formation game coincide with the set of ruling coalitions resulting from the axiomatic approach. A key insight of our analysis is that a coalition is made self-enforcing by the failure of its winning subcoalitions to be self-enforcing. This is most simply illustrated by the following example: with majority rule, two-person coalitions are generically not self-enforcing and consequently, three-person coalitions are self-enforcing (unless one player is disproportionately powerful). We also characterize the structure of ruling coalitions. For example, we determine the conditions under which ruling coalitions are robust to small changes in the distribution of power and when they are fragile. We also show that when the distribution of power across individuals is relatively equal and there is majoritarian voting, only certain sizes of coalitions (e.g., with majority rule, coalitions of size 3, 7, 15, 31, etc.) can be the ruling coalition.
Number of Pages in PDF File: 38
Keywords: coalition formation, political economy, self-enforcing coalitions, stability
JEL Classification: D71, D74, C71
Date posted: December 4, 2006 ; Last revised: October 15, 2009
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