2012 Articles

Competitive Equilibrium in Markets for Votes

Casella, Alessandra M.; Llorente-Saguer, Aniol; Palfrey, Thomas R.

We develop a competitive equilibrium theory of a market for votes. Before
voting on a binary issue, individuals may buy and sell their votes
with each other. We define the concept of ex ante vote-trading equilibrium
and show by construction that an equilibrium exists. The equilibrium
we characterize always results in dictatorship if there is any trade,
and the market for votes generates welfare losses, relative to simple majority
voting, if the committee is large enough or the distribution of values
is not very skewed. We test the theoretical implications in the laboratory
using a continuous open-book multiunit double auction.