Skip to main content Accessibility help

Legislative Bargaining and the Dynamics of Public Investment


We present a legislative bargaining model of the provision of a durable public good over an infinite horizon. In each period, there is a societal endowment that can either be invested in the public good or consumed. We characterize the optimal public policy, defined by the time path of investment and consumption. In a legislature representatives of each of n districts bargain over the current period's endowment for investment in the public good and transfers to each district. We analyze the Markov perfect equilibrium under different voting q-rules where q is the number of yes votes required for passage. We show that the efficiency of the public policy is increasing in q because higher q leads to higher investment in the public good and less pork. We examine the theoretical equilibrium predictions by conducting a laboratory experiment with five-person committees that compares three alternative voting rules: unanimity (q = 5), majority (q = 3), and dictatorship (q = 1).

Corresponding author
Marco Battaglini is Professor of Economics, Princeton University, Fisher Hall, Princeton NJ 08544 (
Salvatore Nunnari is a PhD Candidate in Social Sciences, California Institute of Technology, MC-228-77, 1200 E. California Boulevard, Pasadena, CA 91125 (
Thomas R. Palfrey is Flintridge Foundation Professor of Economics and Political Science, California Institute of Technology, MC-228-77, 1200 E. California Boulevard, Pasadena, CA 91125 (
Hide All
Austen-Smith, David, and Banks, Jeffrey S.. 1996. “Information Aggregation, Rationality, and the Condorcet Jury Theorem.” American Political Science Review 90 (1): 3445.
Aumann, Robert J. (1959). “Acceptable Points in General Cooperative Q-person Games.” In Contributions to the Theory of Games IV, Annals of Mathematics Study 40, eds, Luce, R. D. and Tucker, A. W., Princeton, NJ: Princeton University Press, 287324.
Baron, David P. 1996. “A Dynamic Theory of Collective Goods Procedures.” American Political Science Review 90: 316–30.
Baron, David P., and Ferejohn, John. 1989. “Bargaining in Legislatures.” American Political Science Review 83: 11811206.
Baron, David P., Diermeier, D., and Fong, P.. 2012. “A Dynamic Theory of Parliamentary Democracy.” Economic Theory 49 (3): 703–38.
Barry, Brian. 1965. Political Argument. London: Routledge and Kegan.
Barseghyan, Levon, Battaglini, Marco, and Coate, Stephen. 2011. “Fiscal Policy over the Real Business Cycle: A Positive Theory.” Cornell University. Mimeo.
Battaglini, Marco, and Coate, Stephen. 2006. “Inefficiency in Legislative Policymaking: A Dynamic Analysis.” American Economic Review 97: 118–49.
Battaglini, Marco, and Coate, Stephen. 2008. “A Dynamic Theory of Public Spending, Taxation and Debt.” American Economic Review 98: 201–36.
Battaglini, Marco, Nunnari, Salvatore, and Palfrey, Thomas. 2010. “Political Institutions and the Dynamics of Public Investment.” Caltech Social Science Working Paper 1318.
Battaglini, Marco, Nunnari, Salvatore, and Palfrey, Thomas. 2012. “The Free Rider Problem: A Dynamic Analysis.” Princeton University. Mimeo.
Battaglini, Marco, and Palfrey, Thomas. 2012. “The Dynamics of Redistributive Politics.” Economic Theory 49 (3): 739–77.
Boylan, Richard T., Ledyard, John, and McKelvey, Richard D.. 1996. “Political Competition in a Model of Economic Growth: Some Theoretical Results.” Economic Theory 7 (2): 191205.
Boylan, Richard T., and McKelvey, Richard D.. 1995. “Voting over Economic Plans.” American Economic Review 85 (4): 860–71.
Buchanan, James M., and Tullock, Gordon. 1962. The Calculus of Consent. Logical Foundations of Constitutional Democracy. Ann Arbor: University of Michigan Press.
Choi, Syngjoo, Gale, Douglas, and Kariv, Shachar. 2008. “Sequential Equilibrium in Monotone Games: A Theory-based Analysis of Experimental Data.” Journal of Economic Theory 143 (1), 302–30.
Choi, Syngjoo, Gale, Douglas, Kariv, Shachar, and Palfrey, Thomas. 2011. “Network Architecture, Salience and Coordination.” Games and Economic Behavior 73 (1): 7690.
Condorcet, Marquis de. 1785. Essai sur l'Application de L’ Analyse à la Probabilite des Decisions Rendues à la Pluraliste des Voix. Paris.
Cox, Gary. 1987. “Electoral Equilibria under Alternative Voting Institutions.” American Journal of Political Science 31: 82108.
Dal Bo, Pedro. 2005. “Cooperation under the Shadow of the Future: Experimental Evidence from Infinitely Repeated Games.” American Economic Review 95 (5): 1591–604.
Dal Bo, Pedro, and Frechette, Guillame. 2011. “The Evolution of Cooperation in Infinitely Repeated Games: Experimental Evidence.” American Economic Review 101 (1): 411–28.
Diermeier, Daniel, and Gailmard, Sean. 2006. “Self-interest, Inequality, and Entitlement in Majoritarian Decision-making.” Quarterly Journal of Political Science 1: 327–50.
Diermeier, Daniel, and Morton, Rebecca. 2006. “Experiments in Majoritarian Bargaining.” In Social Choice and Strategic Decisions: Essays in Honor of Jeffrey S. Banks, eds. Austen-Smith, D. and Duggan, J.. Springer: Heidelberg, 201–26.
Duggan, John, and Kalandrakis, Tasos. N.d. “Dynamic Legislative Policy Making.”Journal of Economic Theory. Forthcoming.
Duffy, John, and Ochs, Jack. 2009. “Cooperative Behavior and the Frequency of Social Interaction.” Games and Economic Behavior 66 (2): 785812.
Duffy, John, Ochs, Jack, and Vesterlund, Lise. 2007. “Giving Little by Little: Dynamic Public Good Games.” Journal of Public Economics 91: 1708–30.
Ferejohn, John., Forsythe, Robert E., Noll, Roger G., and Palfrey, Thomas R.. 1982. “An Experimental Examination of Auction Mechanisms for Discrete Public Goods.” In Research in Experimental Economics 2, ed. Smith, Vernon. Greenwich, CT: JAI Press, 175–99.
Frechette, Guillaume, Kagel, John H., and Lehrer, Steven F.. 2003. “Bargaining in Legislatures: An Experimental Investigation of Open versus Closed Amendment Rules.” American Political Science Review 97: 221–32.
Frechette, Guillaume, Kagel, John H., and Morelli, Massimo. 2012. “Pork versus Public Goods: An Experimental Study of Public Good Provision within a Legislative Bargaining Framework.” Economic Theory 49 (3): 779800.
Guth, Werner, Schmittberger, Rolf, and Schwarze, Bernd. 1982. “An Experimental Analysis of Ultimatum Bargaining.” Journal of Economic Behavior and Organization 3: 367–88.
Harrison, G., and Hirshleifer, J.. 1989. “An Experimental Evaluation of Weakest Link/Best Shot Models of Public Goods.” Journal of Political Economy 97: 201–25.
Harstad, Bard. 2005. “Majority Rules and Incentives.” Quarterly Journal of Economics 120 (4): 535–68.
Kagel, John H., Sung, Hankyoung, and Winter, Eyal. “Veto Power in Committees: An Experimental Study.” Experimental Economics 13 (2): 167188.
Kalandrakis, Tasos. 2004. “A Three Player Dynamic Majoritarian Bargaining Game.” Journal of Economic Theory 16 (2): 294322.
Kalandrakis, Tasos. 2009. “Minimum Winning Coalitions and Endogenous Status-quo.” International Journal of Game Theory 39 (4): 617–43.
Ledyard, John O. 1997. “Public Goods: A Survey of Experimental Research.” In The Handbook of Experimental Economics, eds. Kagel, J. H. and Roth, A. E.. Princeton, NJ: Princeton University Press 111–94.
McGuire, Martin C., and Olson, Mancur. 1996. “The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force.” Journal of Economic Literature 34 (1): 7296.
McKelvey, Richard D. 1991. “An Experimental Test of a Stochastic Game Model of Committee Bargaining.” In Laboratory Research in Political Economy, ed. Palfrey, T.. Ann Arbor University of Michigan Press, 139–69.
Olson, Mancur. 1993. “Dictatorship, Democracy, and DevelopmentAmerican Political Science Review 87 (3): 567–76.
Ostrom, Elinor. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. New York: Cambridge University Press.
Ostrom, Elinor, Gardner, Roy, and Walker, James, 1994. Rules, Games, and Common-pool Resources. Ann Arbor: University of Michigan Press.
Palfrey, Thomas, and Rosenthal, Howard. 1994. “Repeated Play, Cooperation and Coordination: An Experimental Study.” Review of Economic Studies 61: 545–65.
Penn, Elizabeth M. 2009. “A Model of Farsighted Voting.” American Journal of Political Science 53 (1): 3654.
Rauch, James. 1995. “Bureaucracy, Infrastructure, and Economic Growth: Evidence from U.S. Cities during the Progressive Era.” American Economic Review 85 (4): 968–79.
Roth, Alvin, and Murnighan, Keith. 1978. “Equilibrium Behavior and Repeated Play of the Prisoner's Dilemma.” Journal of Mathematical Psychology 17: 189–98.
Rousseau, Jean-Jacques. [1762] 1988. On Social Contract or Principles of Political Right. New York. W.W. Norton.
Smith, Vernon. 1977. “The Principle of Unanimity and Voluntary Consent in Social Choice.” Journal of Political Economy 85 (6): 1125–39.
Stokey, N., Lucas, R., and Prescott, E.. 1989. Recursive Methods in Economic Dynamics. Cambridge, MA: Harvard University Press.
Volden, Craig, and Wiseman, Alan E.. 2007. “Bargaining in Legislatures over Particularistic and Collective Goods.” American Political Science Review 101: 7992.
Walker, James M., Gardner, Roy, Herr, Andrew, and Ostrom, Elinor. 2000. “Collective Choice in the Commons: Experimental Results on Proposed Allocation Rules and Votes.” Economic Journal 110 (460): 212–34.
Wicksell, Knut. [1896] 1967. “Ein neues Prinzip der gerechten Besteurung.” Finanztheoretische Undersuchungen Jena: iv–vi, 76–87, 101–59. Trans., Buchanan, James reprinted as “A New Principle of Just Taxation” in Classics. In the Theory of Public Finance. New York: St. Martin's Press, 72118.
Yared, Pierre. 2010. “Politicians, Taxes, and Debt.” Review of Economic Studies 77: 806–40.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

American Political Science Review
  • ISSN: 0003-0554
  • EISSN: 1537-5943
  • URL: /core/journals/american-political-science-review
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
Type Description Title
Supplementary materials

Battaglini et al. supplementary material

 PDF (798 KB)
798 KB


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed