DP7992 Competitive equilibrium in Markets for Votes

Author(s): Alessandra Casella, Aniol Llorente-Saguer, Thomas R Palfrey
Publication Date: September 2010
Keyword(s): Competitive Equilibrium, Experiments, Markets, Vote Trading, Voting
JEL(s): C72, C92, D70, P16
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7992

We develop a competitive equilibrium theory of a market for votes. Before voting on a binary issue, individuals may buy and sell their votes with each other. We define the concept of Ex Ante Vote-Trading Equilibrium, identify weak sufficient conditions for existence, and construct one such equilibrium. We show that this equilibrium must always result in dictatorship and the market generates welfare losses, relative to simple majority voting, if the committee is large enough. We test the theoretical implications by implementing a competitive vote market in the laboratory using a continuous open-book multi-unit double auction.