Coalition Formation in Political Games
We study the formation of a ruling coalition in political environments. Each individual is endowed with a level of political power. The ruling coalition consists of a subset of the individuals in the society and decides the distribution of resources. A ruling coalition needs to contain enough powerful members to win against any alternative coalition that may challenge it, and it needs to be self-enforcing, in the sense that none of its sub-coalitions should be able to secede and become the new ruling coalition. We first present an axiomatic approach that captures these notions and determines a (generically) unique ruling coalition. We then construct a simple dynamic game that encompasses these ideas and prove that the sequentially weakly dominant equilibria (and the Markovian trembling hand perfect equilibria) of this game coincide with the set of ruling coalitions of the axiomatic approach. We also show the equivalence of these notions to the core of a related non-transferable utility cooperative game. In all cases, the nature of the ruling coalition is determined by the power constraint, which requires that the ruling coalition be powerful enough, and by the enforcement constraint, which imposes that no sub-coalition of the ruling coalition that commands a majority is self-enforcing. The key insight that emerges from this characterization is that the coalition is made self-enforcing precisely by the failure of its winning sub-coalitions to be self-enforcing. This is most simply illustrated by the following simple finding: with a simple majority rule, while three-person (or larger) coalitions can be self-enforcing, two-person coalitions are generically not self-enforcing. Therefore, the reasoning in this paper suggests that three-person juntas or councils should be more common than two-person ones. In addition, we provide conditions under which the grand coalition will be the ruling coalition and conditions under which the most powerful individuals will not be included in the ruling coalition. We also use this framework to discuss endogenous party formation.
We thank Attila Ambrus, Irina Khovanskaya, Victor Polterovich, Muhamet Yildiz and seminar participants at the Canadian Institute of Advanced Research, the New Economics School, and University of Pennsylvania PIER conference for useful comments. Acemoglu gratefully acknowledges financial support from the National Science Foundation. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.