DP12938-2 | Dynamic Legislative Bargaining with Veto Power: Theory and Experiments


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In many domains, committees bargain over a sequence of policies and a policy remains in effect until a new agreement is reached. In this paper, I argue that, in order to assess the consequences of veto power, it is important to take into account this dynamic aspect. I analyze an infinitely repeated divide-the-dollar game with an endogenous status quo policy. I show that, irrespective of legislators' patience and the initial division of resources, policy eventually gets arbitrarily close to full appropriation by the veto player; that increasing legislators' patience or decreasing the veto player's ability to set the agenda makes convergence to this outcome slower and the power to veto less valuable; and that the veto player supports reforms that decrease his allocation. The main predictions of the theory find support in controlled laboratory experiments.