Predictability and Power in Legislative Bargaining

This paper examines the relationship between the concentration of political power in legislative bargaining and the predictability of the process governing the recognition of legislators. Our main result establishes that, for a broad class of legislative bargaining games, if the recognition procedure permits the legislators to rule out some minimum number of proposers one period in advance, then irrespective of how patient the individual legislators are, Markovian equilibria necessarily deliver all economic surplus to the first proposer. This result illustrates how the predictability of future power transitions may lead to great inequity, and offers a cautionary message for the benefits of transparency in the allocation of bargaining power. We extend our result to general coalitional settings with non-transferable utility, and show that risk-averse players are made strictly worse off by the early resolution of uncertainty. We show that the result is robust to a number of variations in the game (including perturbations over time, efficient default options, endogenous bargaining protocols, private learning, heterogeneous priors, and inequity-averse preferences) and derive comparative statics to show that the rents captured by the first proposer are increasing in the predictability of bargaining power. We find that amendment procedures can mitigate such inequities, and thereby offer a strong theoretical rationale for such open-rule procedures. *We thank Attila Ambrus, Renee Bowen, Tiberiu Dragu, Simone Galperti, Ben Golub, Matt Jackson, Ehud Kalai, Navin Kartik, Thad Kousser, Alessandro Lizzeri, Mark Machina, Peter Norman, Tom Palfrey, Romans Pancs, Debraj Ray, Ran Shorrer, Joel Sobel, Leeat Yariv, Huseyin Yildirim, Muhamet Yildiz, and various seminar and conference audiences. We thank Erik Lillethun for expert proofreading. Nageeb Ali gratefully acknowledges Microsoft Research for their financial support and hospitality, and financial support from the NSF (SES-1127643). Doug Bernheim gratefully acknowledges financial support from the NSF (SES-0137129). †Department of Economics, University of California, San Diego, and Microsoft Research. Email: [email protected]. ‡Department of Economics, Stanford University. Email: [email protected]. §Department of Economics, New York University. Email: [email protected].