Copyright (c) 2010 All rights reserved. http://works.bepress.com/roger_lagunoff Recent documents in Roger Lagunoff en-us Thu, 01 Apr 2010 08:10:15 PDT 3600 http://works.bepress.com/roger_lagunoff/13 http://works.bepress.com/roger_lagunoff/13 Tue, 30 Mar 2010 06:36:02 PDT This paper adopts a ``revealed preference" approach to the question of what can be inferred about bias in a political system. We examine a dynamic environment in which individuals differ by income each period.Long run preference profiles are unobserved to an outside observer but are known to belong to a well behaved class in which individual preferences are ordered by income in each state. Policy data is summarized by a Markov policy rule. The observer makes inferences about the underlying distribution of political power as if political power were derived from a wealth-weighted voting system with weights that can vary across states. The weights determine the nature and magnitude of the wealth bias. Positive weights on relative income in any period indicate an ``elitist" bias in the political system whereas negative weights indicate a ``populist" one.We ask: what class of weighted systems can rationalize a given policy rule as a weighted-majority outcome each period? Our first result shows that without further knowledge, all forms of bias are possible: any Markov policy rule can be shown to be rationalized by any system of wealth-weighted voting. An additional single crossing restriction on preferences can, however, rule out certain weighting systems. We then augment policy data with polling data and show that the set of rationalizing wealth-weights are bounded above and below, thus ruling out extreme biases. In some cases, polls can provide information about the change in political inequality across time. Roger Lagunoff New Working Papers http://works.bepress.com/roger_lagunoff/12 http://works.bepress.com/roger_lagunoff/12 Tue, 06 May 2008 12:00:12 PDT We study the intergenerational accumulation of knowledge in an infinite-horizon model of communication. Each in a sequence of players receives an informative but imperfect signal of the once-and-for-all realization of an unobserved state. The state affects all players' preferences over present and future decisions. Each player observes his own signal but does not directly observe the realized signals or actions of his predecessors. Instead, he must rely on cheap-talk messages from the previous players to fathom the past. Each player is therefore both a receiver of information with respect to his decision, and a sender with respect to all future decisions. Senders' preferences are misaligned with those of future decision makers. We ask whether there exist "full learning" equilibria -- ones in which the players' posterior beliefs eventually place full weight on the true state. We show that, regardless of how small the misalignment in preferences is, such equilibria do not exist. This is so both in the case of private communication in which each player only hears the message of his immediate predecessor, and in the case of public communication, in which each player hears the message of all previous players. Surprisingly, in the latter case full learning may be impossible even in the limit as all players become infinitely patient. We also consider the case where all players have access to a mediator who can work across time periods arbitrarily far apart. In this case full learning equilibria exist. Roger Lagunoff New Working Papers http://works.bepress.com/roger_lagunoff/11 http://works.bepress.com/roger_lagunoff/11 Tue, 06 May 2008 11:38:45 PDT This paper examines the Faustian dynamics of policy and power. We posit a general class of dynamic games in which current policies affect the future distribution of political power, resulting in the following ``Faustian trade off": if the current ruler chooses his preferred policy, he then sacrifices future political power; yet if he wants to preserve his future power, he must sacrifice his present policy objectives. The trade-off comes from the fact that the current political ruler/pivotal voter cannot un-couple the direct effect of his policy from its indirect effect on future power.A Policy-endogenous (PE) equilibrium describes this endogenous transfer of power, and the resulting evolution of policy and political power over time. We show that the Faustian trade-off in a PE equilibrium is decomposed into two basic rationales. The political preservation effect induces more tempered policy choices than if one's policy choice did not affect one's political fortunes. However, the reformation effect induces ``more aggressive" policies in order to exploit the productivity gains from policies chosen by even more aggressive successors. We distinguish between political systems that give rise to {\em monotone Faustian dynamics --- political power that progressively evolves toward more fiscally liberal types of leaders, and cyclical Faustian dynamics --- political power that oscillates between liberal and conservative types of leaders. In each case, we show that the Faustian trade off moderates the choices of each type of leader. Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/10 http://works.bepress.com/roger_lagunoff/10 Fri, 16 Feb 2007 10:26:41 PST This article examines optimal social linkage when each individual's repeated interaction with each of his neighbors creates spillovers. Each individual's discount factor is randomly determined. A planner chooses a local interaction network or neighborhood design before the discount factors are realized. Each individual then plays a repeated Prisoner's Dilemma game with his neighbors. A local trigger strategy equilibrium (LTSE) describes an equilibrium in which each individual conditions his cooperation on the cooperation of at least one "acceptable" group of neighbors. Our main results demonstrate a basic trade-off in the design problem between suboptimal punishment and social conflict. Potentially suboptimal punishment arises in designs with local interactions since in this case monitoring is imperfect. Owing to the heterogeneity of discount factors, however, greater social conflict may arise in more connected networks. When individuals' discount factors are known to the planner, the optimal design exhibits a cooperative "core" and an uncooperative "fringe." "Uncooperative" (impatient) types are connected to cooperative ones who tolerate their free riding so that social conflict is kept to a minimum. By contrast, when the planner knows only the ex ante distribution over individual discount factors, then in some cases the optimal design partitions individuals into maximally connected cliques (e.g., cul-de-sacs), whereas in other cases incomplete graphs with small overlap (e.g., grids) are possible. Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/9 http://works.bepress.com/roger_lagunoff/9 Fri, 16 Feb 2007 10:20:21 PST This paper studies information disclosure in a model of dynastic government. When information about past policy choices comes exclusively from the reports of previous administrations, each administration has an incentive to choose its (suboptimal) one shot expenditure policy, and then misrepresent its choice to its successor. Consequently, it has been suggested that "horizontal accountability," i.e., a system of governance where auditing functions lie outside the executive branch, can ensure credible disclosure of a government's activities. This paper suggests a cautious approach to that view. The baseline model examines the reporting incentives of an external auditor who can independently verify the information each period. Even with auditing, credible disclosure is shown to be problematic. Various extensions to this baseline model are examined. In one extension, "liberal" (i.e., those prefering larger government expenditures) and "conservative" (those prefering smaller expenditures) regimes and auditors evolve over time. It is shown that "conservative" ("liberal") auditors are not credible when the current regime is also "conservative" ("liberal"). Moreover, because information transmission stops when the auditor's and the regime's biases coincide, effective deterrents even in the "good" periods (when the auditor's and the administration's biases differ) are difficult to construct. In all periods the equilibrium requirement of auditor neutrality constrains the dynamic incentives for efficient policy choices. These constraints are shown to bind away from optimal policies in standard constructions of equilibrium. Various ways in which auditing protocols can overcome these problems are discussed. Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/8 http://works.bepress.com/roger_lagunoff/8 Fri, 16 Feb 2007 10:16:53 PST Why would a political elite voluntarily dilute its political power by extending the voting franchise? This paper develops a dynamic recursive framework for studying voter enfranchisement. We specify a class of dynamic games in which political rights evolve over time. Each period, private decisions of citizens co-mingle with government policies to act upon a state variable such as a capital stock, a public good, or the likelihood of an insurrection. Policies are determined by a pivotal decision maker in a potentially restricted franchise. The pivotal decision maker can also delegate decision authority to a new decision maker in the subsequent period. We describe conditions under which an equilibrium of this "dictator delegation game" corresponds to a majority vote decision by the enfranchised group to expand the set of citizens with voting rights. Under these conditions, each period's pivotal decision maker is a median voter who can designate authority to a new median of a larger voting franchise in the next period. We characterize the equilibria by their Euler equations. In certain games, the equilibria generate paths that display a gradual, sometimes uneven history of enfranchisement that is roughly consistent with observed patterns of extensions. Our main result shows that extensions of the franchise occur in a given period if and only if the private decisions of the citizenry have a net positive spillover to the dynamic payoff of the current median voter. The size of the extension depends on the size of the spillover. Since the class of games we study can accommodate a number of proposed explanations for franchise extension (e.g., the threat of insurrection, or ideological or class conflict within the elite, etc), the result suggests a common causal mechanism for these seemingly different explanations. We describe a number of parametric environments that correspond to the various explanations, and show how the mechanism works in each. Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/7 http://works.bepress.com/roger_lagunoff/7 Fri, 16 Feb 2007 09:34:17 PST When time preferences are heterogeneous and bounded away from one, how "much" cooperation can be achieved by an ongoing group? How does group cooperation vary with the group's size and structure? This paper examines characteristics of cooperative behavior in the class of symmetric, repeated games of collective action. These are games characterized by "free rider problems" in the level of cooperation achieved. Repeated Prisoner's Dilemma games are a special case. We characterize the level of maximal average cooperation (MAC), the highest average level of cooperation, over all stationary subgame perfect equilibrium paths, that the group can achieve. The MAC is shown to be increasing in monotone shifts, and decreasing in mean preserving spreads of the distribution of discount factors. The latter suggests that more heterogeneous groups are less cooperative on average. Finally, in a class of Prisoner's Dilemma games, we show under weak conditions that the MAC exhibits increasing returns to scale in a range of heterogeneous discount factors. That is, larger groups are more cooperative, on average, than smaller ones. By contrast, when the group has a common discount factor, the MAC is invariant to group size. Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/6 http://works.bepress.com/roger_lagunoff/6 Fri, 16 Feb 2007 09:28:58 PST This paper studies the evolution of political institutions in the face of conflict. We examine institutional reform in a class of pivotal mechanisms -- institutions that behave as if the resulting policy were determined by a "pivotal" decision maker drawn from the potential population of citizens and who holds full policy-making authority at the time. A rule-of-succession describes the process by which pivotal decision makers in period t + 1 are, themselves, chosen by pivotal decision makers in period t. Two sources of conflict - class conflict, arising from differences in wealth, and ideological conflict, arising from differences in preferences are examined. In each case, we characterize the unique Markov Perfect Equilibrium of the associated dynamic political game, and show that public decision-making authority evolves monotonically downward in wealth and upward in ideological predisposition toward the public good. We then examine rules-of-succession when ideology and wealth exhibit correlation. Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/5 http://works.bepress.com/roger_lagunoff/5 Fri, 16 Feb 2007 07:24:00 PST This paper examines the issue of multiplicity of Markov Perfect equilibria in alternating move repeated games. Such games are canonical models of environments with repeated, asynchronous choices due to inertia or replacement. Our main result is that the number of Markov Perfect equilibria is generically finite with respect to stage game payoffs. This holds despite the fact that the stochastic game representation of the alternating move repeated game is "non-generic" in the larger space of state dependent payoffs. We further obtain that the set of completely mixed Markov Perfect equilibria is generically empty with respect to stage game payoffs. Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/4 http://works.bepress.com/roger_lagunoff/4 Fri, 16 Feb 2007 07:19:28 PST When are political institutions stable? When do they tend toward reform? This paper examines a model of dynamic, endogenous institutional change. I introduce a class of dynamic political games in which the political aggregation rules used at date t+1 are instrumental choices under rules at date t. A political rule is stable if it selects itself. A reform occurs when an alternative rule is selected. It turns out that the stability of a political rule depends on whether its choices are dynamically consistent. Without a private sector in the model, simple majority rules are dynamically consistent, while wealth-weighted voting rules are not. More generally, the result applies to an extended class of political rules that incorporate private activities such as extra-legal protests, threats, or private investment. The model makes use of an interpretation of rules as ``players" who can strategically delegate future policy-making authority to different institutional types. The approach can be viewed as a comprehensive way of understanding various explanations of institutional change proposed in the literature. A parametric model of dynamic public goods provision gives an illustration. Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/3 http://works.bepress.com/roger_lagunoff/3 Fri, 16 Feb 2007 07:15:12 PST This paper examines existence of Markov equilibria in a class of infinite horizon games in which political institutions are endogenously determined each period. In these dynamic political games (or DPGs) the rules for political aggregation at date t + 1 are decided by the rules at date t, and the resulting institutional choices do not affect payoffs or technology directly. We show that any dynamic political game can be transformed into a stochastic game in which the political institutions are reinterpreted as "public players" in the game. These players' preferences are possibly dynamically inconsistent due to the fact that naturally occurring changes in the economic state, such as evolution of the wealth distribution, alter the way a political institution aggregates preferences of the citizenry over time. The paper characterizes this transformation, and establishes existence of Markov equilibria in which the Markov strategies are smooth functions of the state. Applicability of the result is demonstrated in an example with endogenous voting rules. Roger Lagunoff New Working Papers http://works.bepress.com/roger_lagunoff/2 http://works.bepress.com/roger_lagunoff/2 Fri, 16 Feb 2007 07:12:13 PST We analyze dynastic repeated games. These are repeated games in which the stage game is played by successive generations of finitely-lived players with dynastic preferences. Each individual has preferences that replicate those of the infinitely-lived players of a standard discounted infinitely-repeated game. Individuals live one period and do not observe the history of play that takes place before their birth, but instead create social memory through private messages received from their immediate predecessors. Under mild conditions, when players are sufficiently patient, all feasible payoff vectors (including those below the minmax of the stage game) can be sustained by Sequential Equilibria of the dynastic repeated game with private communication. The result applies to any stage game with n >= 4 players for which the standard Folk Theorem yields a payoff set with a non-empty interior. We are also able to characterize fully the conditions under which a Sequential Equilibrium of the dynastic repeated game can yield a payoff vector not sustainable as a Subgame Perfect Equilibrium of the standard repeated game. For this to be the case it must be that the players' equilibrium beliefs violate a condition that we term "Inter-Generational Agreement." Roger Lagunoff Recent Publications http://works.bepress.com/roger_lagunoff/1 http://works.bepress.com/roger_lagunoff/1 Fri, 16 Feb 2007 07:07:19 PST This paper examines an equilibrium model of social memory -- a society's vicarious beliefs about its past. We show how social memory can be incorrect in a well defined sense, and that incorrect social memory is a key ingredient in creating and perpetuating destructive conflicts between nations. We analyze an infinite-horizon model in which two countries face off each period in a game of conflict characterized by the possibility of mutually destructive "all out war" that yields catastrophic consequences for both sides. Each country is inhabited by a dynastic sequence of individuals. Each individual cares about future individuals in the same country, and can communicate with the next generation of their countrymen using private messages. Social memory is based on these messages, and on physical evidence -- a sequence of imperfectly informative public signals of past behavior. We find that if the future is sufficiently important for all individuals, then regardless of the precision of physical evidence from the past there is an equilibrium in which the two countries' social memory is systematically wrong, and in which the two countries engage in all out war with arbitrarily high frequency, an outcome that cannot arise in the standard repeated game. In our construction, each new generation "repeats the mistakes" of its predecessors, leading to an endless cycle of destructive behavior. Surprisingly, we find that degrading the quality of information that individuals have about current decisions may "improve" social memory so that it can no longer be systematically wrong. This in turn ensures that arbitrarily frequent all out wars cannot occur. Roger Lagunoff Recent Publications