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Title: Dynamic Legislative Bargaining with Veto Power: Theory and Experiments

Author(s): Salvatore Nunnari

Publication Date: May 2018

Keyword(s): Dynamic Legislative Bargaining, Endogenous Status Quo, Laboratory experiments, Markov perfect equilibrium and Veto Power

Programme Area(s): Public Economics

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.

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Bibliographic Reference

Nunnari, S. 2018. 'Dynamic Legislative Bargaining with Veto Power: Theory and Experiments'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12938