Policy Experimentation in Committees: A Case against Veto Rights under Redistributive Constraints

We study optimal policy experimentation by a committee. We consider a dynamic bargaining game in which committee members choose either a risky reform or a safe alternative each period. When no redistribution is allowed, the unique equilibrium outcome is generically inefficient. When redistribution is allowed (even small amounts), there always exists an equilibrium that supports optimal experimentation for any voting rule without veto players. With veto players, however, optimal policy experimentation is possible only with a sufficient amount of redistribution. We conclude that veto rights are more of an obstacle to optimal policy experimentation than are the constraints on redistribution themselves. (JEL D72, C78, H23, D78, D71)

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Would depositors pay to show that they do not withdraw? Theory and experiment

Experimental Economics ◽

10.1007/s10683-020-09646-y ◽

2020 ◽

Vol 23 (3) ◽

pp. 873-894

Author(s):

Markus Kinateder ◽

Hubert János Kiss ◽

Ágnes Pintér

Keyword(s):

Multiple Equilibria ◽

Financial Intermediation ◽

Type Model ◽

Unique Equilibrium ◽

Equilibrium Outcome ◽

Bank Run ◽

Public Announcements ◽

Information Sets ◽

Theoretical Results ◽

Theory And Experiment

Abstract In a Diamond–Dybvig type model of financial intermediation, we allow depositors to announce at a positive cost to subsequent depositors that they keep their funds deposited in the bank. Theoretically, the mere availability of public announcements (and not its use) ensures that no bank run is the unique equilibrium outcome. Multiple equilibria—including bank run—exist without such public announcements. We test the theoretical results in the lab and find a widespread use of announcements, which we interpret as an attempt to coordinate on the no bank run outcome. Withdrawal rates in general are lower in information sets that contain announcements.

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Dynamic bargaining and stability with veto players

Games and Economic Behavior ◽

10.1016/j.geb.2016.04.010 ◽

2017 ◽

Vol 103 ◽

pp. 30-40 ◽

Cited By ~ 6

Author(s):

Vincent Anesi ◽

John Duggan

Keyword(s):

Veto Players ◽

Dynamic Bargaining

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Entry-Proofness and Discriminatory Pricing under Adverse Selection

The American Economic Review ◽

10.1257/aer.20190189 ◽

2021 ◽

Vol 111 (8) ◽

pp. 2623-2659

Author(s):

Andrea Attar ◽

Thomas Mariotti ◽

François Salanié

Keyword(s):

Adverse Selection ◽

Sufficient Condition ◽

Unique Equilibrium ◽

Necessary And Sufficient Condition ◽

Recursive Structure ◽

Equilibrium Outcome ◽

Balanced Allocation ◽

Necessary And Sufficient

This paper studies competitive allocations under adverse selection. We first provide a general necessary and sufficient condition for entry on an inactive market to be unprofitable. We then use this result to characterize, for an active market, a unique budget-balanced allocation implemented by a market tariff making additional trades with an entrant unprofitable. Motivated by the recursive structure of this allocation, we finally show that it emerges as the essentially unique equilibrium outcome of a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets. (JEL D11, D43, D82, D86)

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The core of a strategic game

The B E Journal of Theoretical Economics ◽

10.1515/bejte-2017-0155 ◽

2018 ◽

Vol 19 (1) ◽

Cited By ~ 1

Author(s):

Parkash Chander

Keyword(s):

Partition Function ◽

Cooperative Game ◽

Unique Equilibrium ◽

Strategic Game ◽

Function Form ◽

Equilibrium Outcome ◽

Cooperative Solution ◽

Payoff Vector ◽

The Core ◽

Partition Function Form

AbstractIn this paper, I introduce and study the $\gamma$-core of a general strategic game. I first show that the $\gamma$-core of an arbitrary strategic game is smaller than the conventional $\alpha$- and $\beta$- cores. I then consider the partition function form of a general strategic game and show that a prominent class of partition function games admit nonempty $\gamma$-cores. Finally, I show that each $\gamma$-core payoff vector (a cooperative solution) can be supported as an equilibrium outcome of an intuitive non-cooperative game and the grand coalition is the unique equilibrium outcome if and only if the $\gamma$-core is non-empty.

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Veto players, policy change, and institutional design

Research & Politics ◽

10.1177/2053168017722704 ◽

2017 ◽

Vol 4 (3) ◽

pp. 205316801772270

Author(s):

Tiberiu Dragu ◽

Hannah K. Simpson

Keyword(s):

Incomplete Information ◽

Policy Change ◽

Institutional Design ◽

Status Quo ◽

Veto Players ◽

Policy Outcome ◽

Equilibrium Outcome ◽

Institutional Structures ◽

Ideal Policy ◽

The Status

What institutional arrangements allow veto players to secure maximal welfare when all agree on both the need for and the direction of policy change? To answer this question, we conduct a mechanism design analysis. We focus on a system with two veto players, each with incomplete information about the other’s policy preferences. We show that the unique welfare-maximizing mechanism is the mechanism that implements the preferred policy of the player whose ideal policy is closer to the status quo. We provide examples of institutional structures under which the unique equilibrium outcome of this two-player incomplete information game is the policy outcome implemented by this mechanism, and argue that our result can be used as a normative benchmark to assess the optimality of veto player institutions.

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A Dynamic Multi-Player Bargaining Game with Veto Players

Journal of Systems Science and Complexity ◽

10.1007/s11424-020-9191-z ◽

2020 ◽

Author(s):

Jia Liu ◽

Xianjia Wang

Keyword(s):

Bargaining Game ◽

Veto Players

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Bargaining over Risky Assets

Contributions in Theoretical Economics ◽

10.2202/1534-5971.1040 ◽

2002 ◽

Vol 2 (1) ◽

Cited By ~ 3

Author(s):

Muhamet Yildiz

Keyword(s):

Pareto Optimal ◽

Unique Equilibrium ◽

Equilibrium Outcome ◽

Risky Assets ◽

Rational Allocation ◽

Optimal Allocations ◽

Bargaining Procedure ◽

Subgame Perfect Equilibria ◽

Perfect Equilibria ◽

Pareto Optimal Allocations

We analyze the subgame-perfect equilibria of a game where two agents bargain in order to share the risk in their assets that will pay dividends once at some fixed date. The uncertainty about the size of the dividends is resolved gradually by the payment date and each agent has his own view about how the uncertainty will be resolved. As agents become less uncertain about the dividends, some contracts become unacceptable to some party to such an extent that at the payment date no trade is possible. The set of contracts is assumed to be rich enough to generate all the Pareto-optimal allocations. We show that there exists a unique equilibrium allocation, and it is Pareto-optimal. Immediate agreement is always an equilibrium outcome; under certain conditions, we further show that in equilibrium there cannot be a delay. In this model, the equilibrium shares depend on how the uncertainty is resolved, and an agent can lose when his opponent becomes more risk-averse. Finally, we characterize the conditions under which every Pareto-optimal and individually rational allocation is obtainable via some bargaining procedure as the unique equilibrium outcome.

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