DP8848 Vote Trading With and Without Party Leaders

Author(s): Alessandra Casella, Thomas R Palfrey, S├ębastien Turban
Publication Date: February 2012
Keyword(s): Bargaining, Competitive equilibrium, Experiments, Votes market, Voting
JEL(s): C72, C78, C92, D70, P16
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8848

Two groups of voters of known sizes disagree over a single binary decision to be taken by simple majority. Individuals have different, privately observed intensities of preferences and before voting can buy or sell votes among themselves for money. We study the implication of such trading for outcomes and welfare when trades are coordinated by the two group leaders and when they take place anonymously in a competitive market. The theory has strong predictions. In both cases, trading falls short of full efficiency, but for opposite reasons: with group leaders, the minority wins too rarely; with market trades, the minority wins too often. As a result, with group leaders, vote trading improves over no-trade; with market trades, vote trading can be welfare reducing. All predictions are strongly supported by experimental results.