SIER Working Paper Series

We study an infinite-horizon multilateral bargaining game in which the status quo policy, players’ recognition probabilities, and their voting weights are endogenously determined by the previous bargaining outcome. With players not discounting future payoffs, we show that the long-run equilibrium outcome features the concentration of power by one or two players, depending on the initial bargaining state. If the players’ initial shares are relatively equal, they successfully prevent tyranny, but a two-player oligarchy nevertheless emerges and persists. The same results are obtained with payoff discounting, provided that the players’ shares are not too small. Our results highlight the importance of the initial power distribution and discounting of future payoffs in the long-run development of power configuration.

Keywords: Dynamic bargaining, Endogenous political power, Endogenous institution, Markov perfect equilibrium, Oligarchy