Veto Power and Quality of Governmental Policy
35 Pages Posted: 23 Jul 2008 Last revised: 30 Dec 2010
Date Written: September 8, 2010
Abstract
Cheap talk models provide a strategic analysis of information transmission between the expert and the decision maker when their preferences are not perfectly aligned. Although the majority of these models analyze the case of a single decision maker, in many important settings the decision-making authority is shared between several agents. Here we consider a commonly used procedure: ultimatum bargaining. We examine how the addition of the second decision maker (the veto player) affects communication and the utilities of the players. Surprisingly, we find that the veto player may be worse off, and the first decision maker may be better off, than in the absence of the veto threat.
Keywords: information, cheap talk, veto power, experts
JEL Classification: D72, D78, D82
Suggested Citation: Suggested Citation