Veto players and equilibrium uniqueness in the Baron–Ferejohn model

Abstract

In political economy, the seminal contribution of the Baron–Ferejohn bargaining model constitutes an important milestone for the study of legislative policy making. In this paper, we analyze a particular equilibrium characteristic of this model, equilibrium uniqueness. The Baron–Ferejohn model yields a class of payoff-unique stationary subgame perfect equilibria (SSPE) in which players’ equilibrium strategies are not uniquely determined. We first provide a formal proof of the multiplicity of equilibrium strategies. This also enables us to establish some important properties of SSPE. We then introduce veto players into the original Baron–Ferejohn model. We state the conditions under which the new model has a unique SSPE not only in terms of payoffs but also in terms of players’ equilibrium strategies.