Ulric B. and Evelyn L. Bray Seminar in Political Economy

A party in power can address only a limited number of issues in an election cycle. What issues to address - the party's agenda - has  dynamic  implications  because  it affects what issues will be addressed in the future. What is the optimal agenda in the presence of dynamic concerns? How do bargaining rules affect the agenda? Do dynamic agenda-setting concerns lead to inefficient outcomes? We address these questions in a simple model in which the party in power sets the agenda by choosing one out of two issues to address in each period. The issue left unaddressed rolls over to the next period, becoming an existing issue, and the party in power in that period, then decides whether to address the existing issue or a new issue. How the policy is chosen on an issue depends on the political strength of the incumbent party, which in turn depends on the bargaining rules. Under majority rule, the incumbent party has strong power, and it can unilaterally choose what policy to implement; under unanimity rule, the incumbent party has weak power, and it needs the other party's approval for implementation of the policy it proposes; under super-majority rule, the incumbent party can be either strong or weak depending on the number of seats it holds. We compare the optimal agenda and their efficiency properties under these different bargaining rules.