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Dynamic Legislative Bargaining with Veto Power: Theory and Experiments

Number: 649
Year: 2019
Author(s): Salvatore Nunnari
MIn 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 bythe 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; Distributive Politics; Standing Committees; Endogenous Status Quo; Veto Power; Markov Perfect Equilibrium; Laboratory Experiments
JEL codes: C72, C73, C78, C92, D71, D72, D78