Coalition Governance with Incomplete Information

Abstract

How can coalition cabinets make policy decisions if the policy preferences of the coalition partners are private information? We use a mechanism design approach to study the important process of coalition governance in this setting. We show that, among all possible mechanisms that could structure decision making within a coalition government, the mechanism that leads to the “best” policy compromise among coalition partners when members’ preferences are private information is “constrained ministerial government.” This gives each particular cabinet minister considerable policy-making power within her policy jurisdiction, subject however to the key constraint that other cabinet members maintain some control by setting a bound on how far policy can be changed from the status quo. Our analysis develops a systematic account of what is gained and lost by using any given decision-making procedure and of what types of “compromise” are feasible or desirable when public policy is made by coalitions.