The Micro-Dynamics of Coalition Formation

By Diermeier, Daniel; Swaab, Roderick I. et al. | Political Research Quarterly, September 2008 | Go to article overview

The Micro-Dynamics of Coalition Formation


Diermeier, Daniel, Swaab, Roderick I., Medvec, Victoria Husted, Kern, Mary C., Political Research Quarterly


We present an experimental approach to study the micro-dynamics of coalition formation in an unrestricted bargaining environment. Specifically, we investigate a fundamental feature of sequential coalition bargaining models: expectations about future bargaining behavior will influence current bargaining outcomes. To do so, we test the hypothesis that coalition bargaining may lead to inefficient outcomes as agents are unable to effectively commit to preliminary agreements during the bargaining process. We conjecture that communication plays an important role in establishing such commitments. We then experimentally manipulate the communication channels and show that restrictions undermine trust and lead to decreased efficiency.

Keywords: coalitions; dynamics; coalition formation; experiments

During the past two decades, the theoretical study of coalition governments has been transformed. While earlier approaches largely relied on models adapted from cooperative game-theory (see Laver and Schofield 1990 for a detailed review of this literature), more recent approaches have used noncooperative models (Baron 1989; Diermeier and Merlo 2000; Diermeier, Eraslan, and Merlo 2003; Morelli 1999).' As a point of departure, consider the Baron-Ferejohn (BF) model, the most widely used model of bargaining under majority rule. In all variants of the BF model, a proposer is selected according to a commonly known rule such a random selection proportional to seat shares. He then proposes a policy or an allocation of benefits to a group of voters. According to a given voting rule, the proposal is either accepted or rejected. If the proposal is accepted, the game ends and all actors receive payoffs as specified by the accepted proposal. Otherwise, another proposer is selected, and the process continues until a proposal is accepted or the game ends.2 The BF model predicts that the party with proposal power will propose a minimal winning coalition consisting of himself or herself and the "cheapest" set of voters necessary to ensure acceptance. All other voters will receive a payoff of zero. The amount given to the coalition partners (or continuation value) equals the coalition partners' expected payoffs if the proposal is rejected and the bargaining continues. Proposals are thus always accepted in the first round. The proposing party will always choose coalition partners with the lowest continuation values. The division of spoils will in general be highly unequal, especially if the parties are very impatient.3

This description of the BF model makes it clear why the model has been popular in the study of coalition formation. The "proposer" can be interpreted as the formateur. The recognition rule corresponds to the explicit or implicit selection process used by a monarch, president, or informateur. This selection process is usually viewed as nonpartisan.4 The "voters" in the model can be interpreted as party leaders engaging in negotiations over the formation of the next cabinet, and so forth. Note also that the "proposer premium" creates additional incentives for electoral competition, as parties with higher seat shares may be more likely to be selected as formateur.5

The BF model was the first example of a dynamic-bargaining model applied to coalition formation. It generated various important and novel insights into the specifics of coalition formation that had eluded previous models.6 First, it emphasized the value of proposal power. For example, it has been shown that in a divide-the-dollar setting in which a player has veto power but lacks proposal power, while all other players have some proposal power but no veto power, the veto player receives an equilibrium payoff of zero (Diermeier and Myerson 1994). Second, the recognized proposer can increase his or her payoffs by exploiting the other players' "impatience." Interestingly, this effect is much more pronounced than in bilateral bargaining models (Rubinstein 1982). …

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