Simple Dynamics of Legislative Bargaining: Coalitions and Proposal Power

Simple Dynamics of Legislative Bargaining: Coalitions and Proposal Power

Economic Theory. February
2019, Vol. 67, Issue 1, Pages 319-344

Most public policies continue in effect until changed, and many are stable for extended periods even though they could be changed at any time. This paper presents a simple approach to characterizing Markov perfect equilibria of dynamic legislative bargaining games with stable policies and durable coalitions. The approach involves satisfying proposer and partner incentive constraints when the coalition is formed and challenger defection and replacement constraints once the coalition has been formed. The approach provides a natural definition of coalition membership and facilitates characterization of the trade-off between internal and external proposal power. Surplus coalitions sacrifice external proposal power for increased internal proposal power, and the coalition size that maximizes proposal power is strictly decreasing in the discount factor and strictly increasing in the majority requirement.