Document Type

Article

Publication Date

2020

Abstract

This paper considers the problem faced by a political authority that has to design a legislative mechanism that guarantees the selection of policies that are stable, efficient, and inclusive in the sense of strategically protecting minority interests. Experimental studies suggest that some of these desirable properties can be achieved if decision-makers (e.g., legislators) are induced to display reciprocal and pro-social behavior. However, the question of how a voting mechanism can be designed to incentivize ``selfish" individuals to display such behavior remains unresolved. We propose such a mechanism and find that it is a simplification of legislative procedures used in some democratic societies. This mechanism defines a new equilibrium concept--the reciprocity set--that satisfies all of the aforementioned properties under mild conditions, and it is easily implementable. In addition, it encourages positive reciprocity and generally protects minorities without having to make use of a supermajority rule as many real-world political institutions do. Finally, a comparative analysis shows that this mechanism has other desirable features and properties that distinguish it from other well-known political procedures.

DOI

10.2139/ssrn.3343700

Included in

Finance Commons

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