Massimo Morelli

Demand Competition and Policy Compromise in Legislative Bargaining

I propose a new majoritarian bargaining model in which more than one implicit proposal can be on the table at the same time. Institutional differences from system to system affect the order of play, the equilibrium majorities, and the policy outcome. The ex post distribution of payoffs within a winning coalition is, however, invariant to fundamental institutional differences, and it is always proportional to the distribution of relative ex ante bargaining power. The bargaining process is modeled as a sequential demand game, in which players are called to propose a policy and to specify their desired share of the private benefits related to being in office. The order of play is endogenous, and the distribution of payoffs within an equilibrium majority usually does not depend on who is the proposal maker. The role of the head of state and the advantages to center parties are also studied.

Party Formation and Policy Outcomes under Different Electoral Systems

This paper provides a game-theoretic model of representative democracy with endogenous party formation. Coalition formation may occur before and after elections, and the expected payoffs from the after-election majority game affect incentives to form parties before the elections. In this way Duvergers hypothesis can be formally explained by the strategic behaviour of political elites. If politicians care primarily about private benefits, the equilibrium policy outcome under a proportional electoral system coincides with the median partys position. On the other hand, with quasilinear utility, the distance from the median voter outcome may be lower with plurality rule.

Network formation with sequential demands

This paper introduces a non-cooperative game-theoretic model of sequential network formation, in which players propose links and demand payoffs. Payoff division is therefore endogenous. We show that if the value of networks satisfies size-monotonicity, then each and every equilibrium network is efficient. Formation of networks satisfies size-monotonicity, then each and equilibrium network is efficient. Formation of networks through bilateral every negotiations (link-specific demands) and through absolute participation demands turn out to have the same efficiency properties. The result do not extend to the case in which players can only demand relative shares

Entrepreneurial talent, occupational choice, and trickle up policies

We study market inefficiencies and policy remedies when agents choose their occupations, and entrepreneurial talent is subject to private information. Untalented entrepreneurs depress the returns to entrepreneurship because of adverse selection. The severity of this problem depends on the outside option of entrepreneurs, which is working for wages. This links credit, product and labor markets. A rise in wages reduces the adverse selection problem. These multimarket interactions amplify productivity shocks and may generate multiple equilibria. If it is impossible to screen entrepreneurs then all agents unanimously support a tax on entrepreneurs that drives out the less talented ones. However, if screening is possible, e.g., if wealthy entrepreneurs can provide collateral for their loans, then wealthy entrepreneurs do not support surplus enhancing taxes.

Gamson's Law versus non-cooperative bargaining theory

We compare Gamson’s Law, a popular empirical model of legislative bargaining, with two noncooperative bargaining models in three players divide the dollar games in which no player has enough votes to form a winning coalition on their own. Both of the game theoretic models better organize the comparative static data resulting from changes in nominal bargaining power than does Gamson’s Law. We also identify deviations from the point predictions of the non-cooperative bargaining models. Namely, proposer power is not nearly as strong as predicted under the Baron–Ferejohn model, and a significant number of bargaining rounds tend to take more than two steps under demand bargaining and more than one stage under Baron–Ferejohn, counter to the models’ predictions. Regressions using the experimental data provide results similar to the field data, but fail to do so once one accounts for predictions regarding coalition composition under Gamson’s Law.

The Geography of Inter-State Resource Wars*

We establish a theoretical as well as empirical framework to assess the role of resource endowments and their geographic location for inter-State conflict. The main predictions of the theory are that conflict tends to be more likely when at least one country has natural resources; when the resources in the resource-endowed country are closer to the border; and, in the case where both countries have natural resources, when the resources are located asymmetrically vis-a-vis the border. We test these predictions on a novel dataset featuring oilfield distances from bilateral borders. The empirical analysis shows that the presence and location of oil are significant and quantitatively important predictors of inter-State conflicts after WW2.

Turnout and Power Sharing

We compare turnout under proportional power-sharing electoral systems and winner-take-all elections. The effect of such institutional differences on turnout depends on the distribution of voter preferences. If the two parties have relatively equal support, turnout is higher in a winner-take-all system; the result is reversed when there is a clear underdog. We report findings from a laboratory experiment that was designed and conducted to explore this theoretical hypothesis and several other secondary hypotheses that are also implied by the theoretical model. The results are broadly supportive of the theoretical predictions on comparative turnout, the partial underdog compensation effect and the competition effect.

Strategic Mass Killings

We provide a model of conflict and mass killing decisions to identify the key variables and situations that make mass killings more likely to occur. We predict that mass killings are most likely in countries with large amounts of natural resource rents, polarization, institutional constraints regarding rent sharing, and low productivity of labor. The role of resources such as oil, gas, and diamonds and other key determinants of mass killings is confirmed by our empirical results based on country-level as well as ethnic group–level analysis.

Retrading in Market Games

When agents are not price takers, they typically cannot obtain an efficient reallocation of resources in one round of trade. This paper presents a noncooperative model of imperfect competition where agents can retrade allocations,consistent with the Edgeworth’s idea of recontracting. We show that there are allocations on the Pareto frontier that can be approximated arbitrarily closely when trade is myopic, i.e., when agents play a static Nash equilibrium at every round of retrading. We then show that the converging sequence of allocations generated by myopic retrading can also be supported along some retrade-proof Subgame Perfect Equilibrium path when traders anticipate future rounds of retrading.

The demand bargaining set: general characterization and application to majority games

The invention relates to a package handling and sorting system which sorts small packages according to destination, segregating those with the same destinations for combined shipments. The system depends on a unique combination of conveying equipment automatically controlled by programmed data processing units which utilize data obtained by scanning electronically readable package labels, as well as other information and detection equipment, to examine packages introduced into the system, and to transfer those consigned to the same location to vehicles routed to such locations. The system also generates an electronic trail of package movements, thus providing the capability to trace packages lost in transit.