A Theory of Political Compromise
CEPR Discussion Paper Series No. 1935
Posted: 29 Sep 1998
Date Written: July 1998
Abstract
We study political compromise founded on tacit cooperation. Two political parties must share a fixed pie in each of an infinite sequence of periods. In each period, the party in power has ultimate authority to divide the pie. Power evolves according to a Markov process among a set of political states corresponding to different degrees of political strength for the two. The political strength of each party is a state variable, and the game is dynamic, rather than repeated. Allocations in an efficient, sub-game perfect equilibrium do not follow a Markov process. Rather, a party's share reflects not only its current strength, but also how it got there in the recent history. We characterize the efficient division processes for majority rule and supermajority rule, and ask whether one regime allows greater compromise than the other.
JEL Classification: C73, D78
Suggested Citation: Suggested Citation
Avinash K. Dixit (Contact Author)
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States
609-258-4000 (Phone)
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CESifo (Center for Economic Studies and Ifo Institute)
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Munich, DE-81679
Germany
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CESifo (Center for Economic Studies and Ifo Institute) ( email )
Poschinger Str. 5
Munich, DE-81679
Germany