The Politics of Compromise
Alessandro Bonatti, Heikki Rantakari
American Economic Review · 2016 · Volume 106 · Issue 2
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)
Keywords
Bargaining Theory, Matching Theory, Organizational Behavior, Transaction Costs, Property Rights, Social Choice, Clubs, Committees, Associations, Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior, Search, Learning, Information and Knowledge, Communication, Belief, Unawareness, Information and Product Quality, Standardization and Compatibility
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