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Session 5: Political Economic Theory

July 30-31, 2020
Organized by: 

Avi Acharya (Stanford University), Kyle Bagwell (Stanford University), Steve Callander (Stanford GSB), Hulya Eraslan (Rice University), Dana Foarta (Stanford GSB) and Tom Palfrey (California Institute of Technology)

This session will bring together researchers from political science and economics who apply economic theory to the study of politics. This includes work in the areas of voting theory, political bargaining, policy-making and implementation, lobbying and regulation, and the media and information environment in which politics takes place. The session will encourage productive dialogue between researchers in economic theory that have developed ideas and tools relevant to the study of poli0cs, and those in poli0cal science study questions and topics that can be addressed by economic theory.

In this Session

Jul 30 | 8:30 am to 9:00 am

Check-in | Breakfast

Jul 30 | 9:00 am to 9:45 am

Coalition Formation in Legislative Bargaining

Presented by: Marco Battaglini (Columbia University)

We propose a new model of legislative bargaining in which coalitions have different values, reflecting the fact that the policies they can pursue are constrained by the identity of the coalition members. In the model, a formateur picks a coalition and negotiates for the allocation of the surplus it is expected to generate. The formateur is free to change coalitions to seek better deals with other coalitions, but she may lose her status if bargaining breaks down, in which case a new formateur is chosen.

Jul 30 | 9:45 am to 10:00 am

Break

Jul 30 | 10:00 am to 10:45 am

Bargaining Over Mandatory Spending and Entitlements

Presented by: Marina Azzimonti (Stony Brook University)
Co-Author(s): Laura Karpuska (BlueLine Asset Management) and Gabriel Mihalache (Stony Brook University)

Do mandatory spending rules improve society’s welfare? To answer this, we analyze an infinite horizon dynamic political-economy model with two parties which disagree on how to split a fixed budget between public and private goods. We study the welfare implications of introducing two types of budget rules, mandatory spending on public goods and entitlement programs, the latter imposing constraints on the private goods’ allocations that can be implemented. We model budget rules following the literature on legislative bargaining with an endogenous status quo.

Jul 30 | 10:45 am to 11:15 am

Break

Jul 30 | 11:15 am to 12:00 pm

Deliberative Minipublics

Presented by: Arjada Bardhi (Duke University)
Co-Author(s): Nina Bobkova (Rice University)
Jul 30 | 12:00 pm to 1:15 pm

Lunch

Jul 30 | 1:15 pm to 2:00 pm

Informational Lobbying and Activism

Presented by: Bard Harstad (University of Oslo)
Co-Author(s): Georgy Egorov (Northwestern University)

In many markets, both consumers and regulators care about characteristics of the product itself (e.g., safety) or of the production process, (e.g., pollution). At the same time, it is typical that neither the regulator nor consumers have precise information at the time of buying. NGOs and activists often have the motivation, expertise, and capacity to acquire such information, but to influence the market they need to present this information to either consumers, who might subsequently boycott the product, or to the regulator, who might enforce the regulation or withdraw

Jul 30 | 2:00 pm to 2:30 pm

Break

Jul 30 | 2:30 pm to 3:15 pm

Endogenous Experimentation in Organizations

Presented by: Germán Gieczewski (Princeton University)
Co-Author(s): Svetlana Kosterina (Princeton University)

We study policy experimentation in organizations with endogenous membership. An organization initiates a policy experiment and then decides when to stop it based on its results. As information arrives, agents update their beliefs, and become more pessimistic whenever they observe bad outcomes. At the same time, the organization’s membership adjusts endogenously: unsuccessful experiments drive out conservative members, leaving the organization with a radical median voter. We show that, under mild conditions, the latter effect dominates.

Jul 30 | 3:15 pm to 3:45 pm

Break

Jul 30 | 3:45 pm to 4:30 pm

Mediating Conflict in the Lab

Presented by: Alessandra Casella (Columbia University)
Co-Author(s): Evan Friedman & Manuel Perez Archila
Jul 31 | 8:30 am to 9:00 am

Breakfast

Jul 31 | 9:00 am to 9:45 am

Accountability and Political Competition

Presented by: Arianna Degan (Université du Québec à Montréal)
Co-Author(s): Braz Camargo (Sao Paulo School of Economics)

Is increasing political competition good for voters? We study this question in the political career concerns framework. Our results show that the relationship between political competition, viewed as the cost of challenging incumbent politicians, and the politicians’ incentive to behave in the voters’ interest is undetermined. The same holds for the relationship between political competition and voter welfare, where selection of politicians into office also matters. In particular, voter welfare need not be maximized when challenging incumbent politicians is costless.

Jul 31 | 9:45 am to 10:00 am

Break

Jul 31 | 10:00 am to 10:45 am

Political Career Dynamics

Presented by: Elliot Lipnowski (Columbia University)
Co-Author(s): Avi Acharya (Stanford University) and João Ramos (University of Southern California)

How does political accountability shape the careers of politicians? We examine a model of accountability under repeated moral hazard, and study the career dynamics of incumbent politicians under the voter-optimal equilibrium. When discounting is low then stationary equilibria are optimal. But for higher rates of discounting, the equilibrium path features richer dynamics under which the re-election prospects of a politician improve with good performance and deteriorate with bad performance.

Jul 31 | 10:45 am to 11:15 am

Break

Jul 31 | 11:15 am to 12:00 pm

Crime Entanglement, Deterrence and Witness Credibility

Presented by: Harry Pei (Northwestern University)
Co-Author(s): Bruno Strulovici (Northwestern University)

When a defendant is accused of multiple crimes, one may consider punishing him if theprobability that he has committed at least one of these crimes is high. We show that entangling criminal accusations in this way can severely harm deterrence and reduce witnesses’ credibility. When conviction entails a large punishment, an individual’s decisions to commit distinct crimes are substitutes and witnesses’ reports are complements.

Jul 31 | 12:00 pm to 1:15 pm

Lunch

Jul 31 | 1:15 pm to 2:00 pm

Voting and Trading: The Shareholder’s Dilemma

Presented by: Adam Meirowitz (University of Utah, David Eccles School of Business)
Co-Author(s): Shaoting Pi (University of Utah, David Eccles School of Business)

We develop a game theoretic model of shareholder voting that captures the fact that shareholders are ultimately traders seeking to maximize the value of their portfolio. Whether or not this induces them to vote for policies that they believe will benefit the firm must be determined in equilibrium.

Jul 31 | 2:00 pm to 2:30 pm

Break

Jul 31 | 2:30 pm to 3:15 pm

Equitable Voting Rules

Presented by: Leeat Yariv (Princeton University)
Co-Author(s): Laurent Bartholdi (Institute of Advanced Studies, Lyon), Wade Hann-Caruthers (California Institute of Technology), Maya Josyula (California Institute of Technology) and Omer Tamuz (California Institute of Technology)
Jul 31 | 3:15 pm to 3:45 pm

Break

Jul 31 | 3:45 pm to 4:30 pm

Are Trade Agreements Good for You?

Presented by: Giovanni Maggi (Yale University)
Co-Author(s): Ralph Ossa (University of Zurich)