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Bargaining over governments in a stochastic environment

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  • Merlo, Antonio

Abstract

In this paper we structurally estimate a game-theoretic model of government formation in a multiparty parliamentary democracy. We focus on the timing and the terms of government agreements in the context of a multilateral stochastic model of sequential bargaining with complete information (Merlo and Wilson (1194, 1995)) where efficient delays may occur in the unique equilibrium. Besides showing that our model yields a good fit to the data on the duration of negotiations over government formation as well as government durations in postwar Italy, we use our estimates to quantify the advantage to proposing and to conduct policy experiments to evaluate the effects of changes in the bargaining procedure. We show that the gains from proposing tend to be quite large. Also, we show that changes in the proposer selection process would not affect either the duration of negotiations or government durations, while the imposition of a strict deadline would in general reduce the incentives to delay agreement as well as government durations.

Suggested Citation

  • Merlo, Antonio, 1996. "Bargaining over governments in a stochastic environment," Bulletins 7476, University of Minnesota, Economic Development Center.
    • Handle: RePEc:ags:umedbu:7476
    DOI: 10.22004/ag.econ.7476
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    More about this item

    Keywords

    Political Economy;

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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