Dynamic Legislative Bargaining with Veto Power: Theory and Experiments

113 Pages Posted: 21 May 2018 Last revised: 16 Jun 2020

See all articles by Salvatore Nunnari

Salvatore Nunnari

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: May 2018

Abstract

In many domains, committees bargain over a sequence of policies and a policy remains in effect until a new agreement is reached. In this paper, I argue that, in order to assess the consequences of veto power, it is important to take into account this dynamic aspect. I analyze an infinitely repeated divide-the-dollar game with an endogenous status quo policy. I show that, irrespective of legislators' patience and the initial division of resources, policy eventually gets arbitrarily close to full appropriation by the veto player; that increasing legislators' patience or decreasing the veto player's ability to set the agenda makes convergence to this outcome slower; and that the veto player supports reforms that decrease his allocation. These results stand in sharp contrast to the properties of models where committees bargain over a single policy. The main predictions of the theory find support in controlled laboratory experiments.

Keywords: Dynamic Legislative Bargaining, Endogenous Status Quo, Laboratory experiments, Markov perfect equilibrium, Veto Power

JEL Classification: C72, C73, C78, D71, D72, D78

Suggested Citation

Nunnari, Salvatore, Dynamic Legislative Bargaining with Veto Power: Theory and Experiments (May 2018). CEPR Discussion Paper No. DP12938, Available at SSRN: https://ssrn.com/abstract=3182398

Salvatore Nunnari (Contact Author)

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Via Roentgen 1
Milan, 20136
Italy

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