Abstract
This paper analyses a model of legislative bargaining in which parties form tentative coalitions (protocoalitions) before deciding on the allocation of a resource. Protocoalitions may fail to reach an agreement, in which case they may be dissolved (breakdown) and a new protocoalition may form. We show that agreement is immediate in equilibrium, and the proposer advantage disappears as the breakdown probability goes to zero. We then turn to the special case of apex games and explore the consequences of varying the probabilities that govern the selection of formateurs and proposers. Letting the breakdown probability go to zero, most of the probabilities considered lead to the same ex post pay-off division. Ex ante expected pay-offs may follow a counterintuitive pattern: as the bargaining power of weak players within a protocoalition increases, the weak players may expect a lower pay-off ex ante.
Highlights
The Baron-Ferejohn [1] model is the most frequently used formal model of legislative bargaining.In this model, there are n identical legislators, and decisions are made by simple majority
We show that all stationary subgame perfect equilibria of this model have immediate agreement
For any S ∈ W, the internal game has a unique stationary subgame perfect equilibrium pay-off vector y S, and this pay-off vector is related to y by a simple formula
Summary
The Baron-Ferejohn [1] model is the most frequently used formal model of legislative bargaining. The distinctive feature of this model is that negotiations over pay-off division may break down, in which case the protocoalition is dissolved and the process starts again from the beginning, i.e., a formateur is selected anew. This property makes the process stationary and easier to analyse, but it makes the breakdown outcome endogenous.. If the protocoalition breaks down with certainty after a proposal is rejected, we are essentially back in the original Baron-Ferejohn model; if the breakdown probability tends to zero, pay-off division within the coalition converges to the equal division. If we increase the bargaining power of a player within a protocoalition, equilibrium strategies may adjust in such a way that this player is less likely to be included in the protocoalition that forms and may be worse-off as a result
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