Working Paper No. 97-05:
The Market For Votes: Coasian Bargaining in An Arrovian Setting

Author(s):

Date Posted: 1997

Availability: Citation only

Abstract:

This paper shows how Arrow's (1951) possibility theorem is modified by allowing bargaining and side-payments across members of majority and minority coalitions. Under fairly plausible conditions, the outcome will be stable and unique. If voters have similar utility functions centered around different ideal policy points, then the bargaining will be conducive to the "center of mass" of the policy triangle. Such an outcome will satisfy both the Benthamite and the Nash criteria of social welfare. If voters have differently- shaped utility functions, the Benthamite and Nash optimal points will not coincide, and the bargaining outcome will only satisfy the Benthamite criterion.