Competitive Equilibrium in Markets for Votes
71 Pages Posted: 1 Aug 2011 Last revised: 9 Aug 2011
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Competitive Equilibrium in Markets for Votes
Competitive Equilibrium in Markets for Votes
Competitive Equilibrium in Markets for Votes
Competitive Equilibrium in Markets for Votes
Date Written: 2011
Abstract
We develop a competitive equilibrium theory of a market for votes. Before voting on a binary issue, individuals may buy and sell their votes with each other. We define the concept of ex ante vote-trading equilibrium, and show by construction that an equilibrium exists. The equilibrium we characterize always results in dictatorship if there is any trade, and the market for votes generates welfare losses, relative to simple majority voting, if the committee is large enough or the distribution of values not very skewed. We test the theoretical implications by implementing a competitive vote market in the laboratory using a continuous open-book multi-unit double auction.
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