Game Theory and Public Policy, SECOND EDITION
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Game Theory and Public Policy, SECOND EDITION

Roger A. McCain

This book provides a critical, selective review of concepts from game theory and their applications in public policy, and further suggests some modifications for some of the models (chiefly in cooperative game theory) to improve their applicability to economics and public policy.
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Chapter 15: Bargaining power and majority rule

Roger A. McCain

Extract

We often hear that in real-world politics, “wheeling and dealing” and exchanging one favor for another are as common as straightforward voting on the basis of “the issues,” if not more common. On the other hand, some bitter experiences of the last century and this suggest that voting bodies that are unable to compromise are not likely to succeed as bodies of democratic governance. Compromise is a process in which each side gives up what it wants less in order to obtain what it wants more, exchanging one favor for another. Economists tend to believe that, at least in some circumstances, wheeling and dealing tends to improve efficiency. It seems that decisions in many voting bodies might be described by a two-stage decision process in which the first stage is a bargaining process and the second is a vote that is often a formality. This does not mean that the voting is irrelevant, but, rather, that it limits the threats that may be made and so influences bargaining power at the first stage. This chapter will explore a two-stage game in which the first stage is a bargaining process and the game terminates if there is an agreement, while at the second stage, if there is no agreement at the first stage, a contested election is held to determine the joint strategy of the body. Bargaining power at the first stage is attributed to minimum winning coalitions in the possible second stage election.

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