American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Politics of Compromise
American Economic Review
vol. 106,
no. 2, February 2016
(pp. 229–59)
Abstract
An organization must select among competing projects that differ in their payoff consequences for its members. Each agent chooses a project and exerts effort affecting its completion time. When one or more projects are complete, the agents select which one to adopt. The selection rule for multiple projects that maximizes ex post welfare leads to inefficiently high polarization; rules that favor later proposals improve upon ex post optimal selections. The optimal degree of favoritism increases in the cost of effort and discount rate. This trade-off informs the design of process rules in standard-setting organizations and helps explain their performance. (JEL C78, D23, D71, D72, D83, L15)Citation
Bonatti, Alessandro, and Heikki Rantakari. 2016. "The Politics of Compromise." American Economic Review, 106 (2): 229–59. DOI: 10.1257/aer.20140316Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D23 Organizational Behavior; Transaction Costs; Property Rights
- D71 Social Choice; Clubs; Committees; Associations
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L15 Information and Product Quality; Standardization and Compatibility