The Politics of Compromise
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An organization must select among competing projects that differ in their payoff consequences for its members. Each agent chooses a project and exerts effort affecting its completion time. When one or more projects are complete, the agents select which one to adopt. The selection rule for multiple projects that maximizes ex post welfare leads to inefficiently high polarization; rules that favor later proposals improve upon ex post optimal selections. The optimal degree of favoritism increases in the cost of effort and discount rate. This trade-off informs the design of process rules in standard-setting organizations and helps explain their performance. (JEL C78, D23, D71, D72, D83, L15)
Date issued
2016-02Department
Massachusetts Institute of Technology. Department of Economics; Sloan School of ManagementJournal
American Economic Review
Publisher
American Economic Association
Citation
Bonatti, Alessandro and Rantakari, Heikki. “The Politics of Compromise.” American Economic Review 106, no. 2 (February 2016): 229–259. © 2016 American Economic Association
Version: Final published version
ISSN
0002-8282