Legislative bargaining and coalition formation (Q697927)

The paper studies the finite horizon version of Baron and Ferejohn's (1989) legislative bargaining model is investigated. The author shows that if there are three or more rounds of bargaining, then a continum of division s is supportable as subgame perfect equilibrium outcomes. There exist equilibria where coalitions larger than a minimal winning coalation receive strictly positive shares. In fact, any interior division can be supported as a subgame perfect equilibrium outcome if the players are sufficiently patient and there are sufficiently many rounds of bargaining. In contrast a generic uniqueness result applies when introducing heterogeneous time preferences.The unique backwards induction equilibrium in the perturbed game is nonstationary, and neither the original (symmetric) nor the perturbed game provides guidance for equilibrium selection in the infinite game. The paper consists of 6 sections and the appendix contains all the proofs of the main theorems.