Committees as Substitutes for Commitment

Abstract

In this paper, policies are negotiated in a committee by playing a dynamic voting game with an endogenous default (or status quo) policy. We show that joining a committee by maintaining a strong agenda setting power is a way for a decision maker to commit to a policy that in absence of committees, is not time consistent. The disciplinary role of the endogenous status quo and the heterogeneity of preferences within the committee are two crucial ingredients to obtain this result. As a motivating example, this paper focuses on the time consistency of monetary policy.

Keywords: Time Consistency Problems, Dynamic Voting, Committees

JEL Classification: D72, E61, E58