Essays in Political Economy

Abstract

This dissertation studies decision-making in political environments. Focusing on lobbying, elections and legislative bargaining, the dissertation uncovers the sources of inefficient outcomes in these settings. The first two chapters explore how incomplete information can result in inefficiency in lobbying and in elections respectively. The second and the third chapters show how the collective nature of decision-making in elections and in bargaining can have a deleterious impact on efficiency.

The first chapter studies persuasion with unknown beliefs.

In the model, a sender designs an information structure to persuade a receiver to take an action. The sender is ignorant about the receiver's prior, and evaluates each information structure using the receiver's prior that is the worst for the sender. I characterize the optimal information structures in this environment. I show that there exists an optimal signal with two realizations, characterize the support of the signal and provide a formula that the signal must satisfy on the support, showing that the optimal signal is a hyperbola. The lack of knowledge of the receiver's prior causes the sender to hedge her bets: the optimal signal induces the high action in more states than in the standard model, albeit with a lower probability. Increasing the sender's ignorance can hurt both the sender and the receiver.

The second chapter studies a model of information aggregation in elections with multiple states of the world and multiple signals.

I focus on a particularly simple class of equilibria -- threshold equilibria -- and completely characterize information aggregation within this class.

As a consequence, my analysis provides sufficient conditions for the existence of a sequence of equilibria that does not aggregate information.

The third chapter studies a model of multilateral bargaining in which multiple proposers simultaneously make offers on several pies. I identify a novel source of inefficient delay unique to multilateral bargaining -- free-riding among proposers combined with the variability of proposal power. I establish that there exist stationary equilibria with delay and characterize the equilibrium agreement sets. In the worst equilibrium agents agree if and only if the proposal power is sufficiently concentrated. I compare the efficiency consequences of different voting rules, showing that voting rules requiring approval by greater majorities lead to more delay in the worst equilibrium. Finally, I show that if the proposal power can be divided finely among the agents, then there are distributions of power such that in the worst equilibrium, as the number of agents grows large, delay consumes almost all surplus.