April 25, 2006
THE ART OF COMPROMISE
Maria Gallego
Wilfrid Laurier University
David Scoones
University of Victoria
The Art of Compromise - 1
The Single European Act of 1986 (Moravcsik 1991)
European integration not possible until political re-alignment
• German: before 1983 Kohl wants change
•
1983 election leads to coalition government
• Britain: 1979 election
•
From Labor to Conservative (willing to talk)
• France: Mitterrand in 1983
•
More willing to achieve European integration
•
Breaks coalition with Communists (electoral decline)
Miterrand reaches agreements
first with Germany then with Britain
“re-launch" Europe towards greater integration
Culminating in the 1992 Maastricht Treaty
The Art of Compromise - 2
THE PROBLEM
When policy is outcome of intergovernmental negotiations
with agreements subject to ratification
Can voters influence policy negotiations?
Ratification in multi-party (≥ 3) systems
⇒ governing party accountable to legislatures
•
Under coalition governments
non-ruling parties may influence agreements
Voters
•
Preferences differ across jurisdictions
•
No control over electoral outcomes of other jurisdiction
⇒ Elect party that better represents their interest
The Art of Compromise - 3
RESULTS
Changes in policy depend on
•
governing parties at both levels
•
on the agreements voters anticipate and their ranking
Ranking depends on party’s willingness to compromise
1) if all are equally willing to compromise
⇒ policy ranking and party's ideal policies coincides
regular voting patterns
2) if one party is more willing to compromise
⇒ policy ranking does not follow party's ideals
irregular voting patterns
The Art of Compromise - 4
MODEL: PREFERENCES
Voters and parties have unimodal utilities over policy x FS ∈ [0,1] :
0
u i ( x FS , θˆ i )
1
θ̂i
Voters’ ideal policies distributed according to Γ over [0, 1]
Three parties L, C, and R identical at F and S levels
•
ideal policies:
0
•
θ̂ L
0 ≤ θˆ L < θˆ C < θˆ R ≤ 1
θ̂C
θ̂ R
Assume status Quo policy (exogenous):
1
Q ∈ [0, θˆ C )
The Art of Compromise - 5
MODEL
Sequential one period complete information game
Federal results given
Stage 1:
State election
voters simultaneously vote for a single party
Stage 2:
Selection of State formateur
according to vote shares (proportional representation)
Stage 3:
Intergovernmental negotiations
between F and S formateurs
Stage 4:
Simultaneous Ratification vote
in F and S legislatures
Solve backwards
The Art of Compromise - 6
POLICIES THAT MAKE PARTY j
NO WORSE OFF THAN STATUS QUO Q
Let θ j
u j ( θ j ) = u j (Q)
be such that
θj
θ̂ j
Q
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RATIFICATION GAME
Intergovernmental agreement a FS
•
simultaneously ratified in both legislatures
•
if at least one vetoes ⇒
status Quo Q prevails
Parties identical at F and S levels
⇒ use same ratification strategy in both legislatures
For each legislature (House) h =F, S
(i)
If party j holds a majority in legislature h then
a FS ratified
(ii)
⇔ a FS preferred by j to Q
If no party holds a majority in legislature h, then
a FS ratified ⇔ a FS preferred by at least two parties to Q
The Art of Compromise - 8
INTERGOVERNMENTAL NEGOTIATIONS (IGN)
For some pairs of formateurs IGN are not bargaining problems:
If F=S: same party j forms government in both houses
(i) if j holds a majority in each house
⇒
formateurs agree on common ideal policy
(ii) if j must form a coalition in either house, then
•
j=L ratifiable agreement is max{ θˆ L , Q }
Q θ̂ L θ̂ C
•
θ̂ R
θ̂ C
θ̂ L Q
j=C ratifiable agreement is C's ideal policy θ̂ C
Q
•
θ̂ R
θ̂L Q
θ̂C
θ̂R
j=R ratifiable agreement is min{ θˆ R , θC
Q
θC
θ̂R θC
Q
θ̂C
θC
}
θ̂ R
The Art of Compromise - 9
INTERGOVERNMENTAL NEGOTIATIONS
If the formateurs differ F ≠ S ,
θˆ L < Q < θˆ C
and L is one of the formateurs
⇒
θ̂ L
Q
θ̂ C
Q remains in place
θ̂ R
The Art of Compromise - 10
INTERGOVERNMENTAL NEGOTIATIONS
Remaining cases: F ≠ S (LC, LR, and CR) face true bargaining problems
•
There are policies preferred by both to Q
•
Disagreement over which is best
When both hold majorities ⇒
ratification is guaranteed
When one or both formateurs do not hold a majority
if they agree on a policy that improves on Q
⇒ control the majorities to ratify
The Art of Compromise - 11
INTERGOVERNMENTAL NEGOTIATIONS (IGN)
For formateurs j ≠ k
Q
Q < θˆ j < θˆ k < θ j
with
θ̂ j
θ̂ k
⇒ mutually acceptable policies:
θj
θk
[Q, θ j ]
Bargaining set B jk (Q) , utility pairs over which bargain
u k (θˆ k )
θˆ k ≤ θ j
u k (θj)
B jk (Q)
u k (θˆ j )
u k ( Q)
u j (Q)
Pareto frontier:
u j (θˆ k )
u j (θˆ j )
downward sloping portion
The Art of Compromise - 12
INTERGOVERNMENTAL NEGOTIATIONS
Gains to agreeing on
a
are
[u j (a ) − u j (Q) ]
Nash (1950)
[u k (a ) − u k (Q)]
and
maximize product of gains:
NP = [u j (a ) − u j (Q)][u k (a ) − u k (Q)]
Unique solution is (u j (a jk *), u k (a jk *)) :
NPjk (a jk * Q) is tangent to B jk (Q)
NPjk (a jk * | Q) = K
u k (θˆ k )
u k (a jk *)
u k ( θj )
u k (θˆ j )
u k (Q )
u j (Q )
•
u j (θˆ k )
u j (a jk *)
u j (θˆ j )
Agreement between j and k: a jk * ∈ [θˆ j , θˆ k ]
The Art of Compromise - 13
SELECTION OF STATE FORMATEUR
State formateur selected according to vote shares
⇒ Probability of party j becomes formateur is given by
⎧
⎪
μj = ⎨
⎪
⎩
1
0
Vj
if V j ≥ 1 / 2
if max{V − j } ≥ 1 / 2
otherwise
The Art of Compromise - 14
THE STATE ELECTION
Voters recognize policy depends on F and S and M/m on IGN and ratification
Voters can rank some policies
• θˆ L , θˆ R , θˆ C or compromises of L ( max{ θˆ L , Q } ) and R ( min{ θˆ R , θC } )
• problem:
where is a LR * relative to a LC *
Party’s willingness to compromise ⇒
and
a CR * ?
rank policies
The unique voting equilibrium is characterized by
•
two "marginal" voters:
0
ν1 *
ν1 *
ν2 *
and
ν 2 * who partition voters
1
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WILLINGNESS TO COMPROMISE (WTC)
Assume R a majority in Federal house and voters uniformly distributed on [0,1]
C and R have quadratic utilities
u k (a ) = −(θˆ k − a ) 2
θˆ L = 0.25
•
ideal policies of parties:
•
L’s preferences: u L (a ) = −(0.25 − a )2 n
⇒
θˆ C = 0.33
and
θˆ R = 1
where n ={1,6}
willingness to compromise increases as n increases
State
Formateur
(i) R M1
(ii) R m1
(iii) C M/m
(iv) L M/m
Example 3: n=1
Example 5: n=6
a RR = θˆ R = 1
a RR = θC = 0.66
a RC = 0.419
a RL = 0.322
Voting equilibrium
L's vote (0,0.37)
a RR = θˆ R = 1
a RR = θC = 0.66
a RC = 0.419
a RL = 0.434
Voting equilibrium
C' s vote (0.37,0.54)
R' s vote (0.54,1)
C' s vote (0,0.427) *
L' s vote (0.427,0.547) *
R' s vote (0.547,1)
As L’s WTC increases ⇒ ranking differs from party’s ideals
The Art of Compromise - 16
THE SINGLE EUROPEAN ACT OF 1986 (Moravcsik 1991)
EU integration not possible (change in status quo) until political change
• Germany: wanted change
• Britain: Thatcher willing to talk
• France: in 1983 Mitterrand: more willing to achieve integration
•
Drops coalition with Communist Party
Miterrand reaches bilateral agreements with Germany then with Britain
Changes in EU will require
•
intergovernmental agreements and
parties willing to compromise
•
voters who support changes
The Art of Compromise - 17