Competitive Equilibrium in Markets for Votes

68 Pages Posted: 25 Feb 2012

See all articles by Alessandra Casella

Alessandra Casella

Columbia University - Graduate School of Arts and Sciences, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Aniol Llorente-Saguer

Queen Mary University of London

Thomas R. Palfrey

California Institute of Technology - Division of the Humanities and Social Sciences

Multiple version iconThere are 4 versions of this paper

Date Written: February 17, 2012

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 equilibriumwe 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.

Keywords: Experiments, voting, Markets, Vote Trading, Competitive Equilibrium

JEL Classification: C92, C72, D70, P16

Suggested Citation

Casella, Alessandra and Llorente-Saguer, Aniol and Palfrey, Thomas R., Competitive Equilibrium in Markets for Votes (February 17, 2012). MPI Collective Goods Preprint, No. 2012/3, Available at SSRN: https://ssrn.com/abstract=2010473 or http://dx.doi.org/10.2139/ssrn.2010473

Alessandra Casella (Contact Author)

Columbia University - Graduate School of Arts and Sciences, Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Aniol Llorente-Saguer

Queen Mary University of London ( email )

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Thomas R. Palfrey

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

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