Working Paper: CEPR ID: DP12938
Authors: Salvatore Nunnari
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.
Keywords: dynamic legislative bargaining; endogenous status quo; veto power; Markov perfect equilibrium; laboratory experiments
JEL Codes: C72; C73; C78; D71; D72; D78
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| veto player (D72) | ideal policy (D78) |
| patience of legislators (D72) | convergence to ideal outcome (C62) |
| veto player's agenda-setting ability (D72) | convergence to ideal outcome (C62) |
| veto player (D72) | bargaining dynamics (C79) |
| veto player supports reforms (D72) | future bargaining position (J52) |