Working Paper: CEPR ID: DP7992
Authors: Alessandra Casella; Aniol Llorente-Saguer; Thomas R. Palfrey
Abstract: 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.
Keywords: competitive equilibrium; experiments; markets; vote trading; voting
JEL Codes: C72; C92; D70; P16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| vote trading (D72) | dictatorship (P16) |
| dictatorship (P16) | concentration of decision power (D70) |
| dictatorship (P16) | welfare losses (D69) |
| vote trading (D72) | welfare losses (D69) |
| vote trading (D72) | inefficiency in market (D61) |
| inefficiency in market (D61) | welfare losses (D69) |
| transaction prices (P22) | higher than risk-neutral equilibrium prices (G19) |