Coalition formation for unpopular reform in the presence of private reputation costs

Winschel, Evguenia

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URL:	https://ub-madoc.bib.uni-mannheim.de/33006
URN:	urn:nbn:de:bsz:180-madoc-330061
Document Type:	Working paper
Year of publication:	2012
The title of a journal, publication series:	Working Paper Series
Volume:	13-08
Place of publication:	Mannheim
Publication language:	English
Institution:	School of Law and Economics > VWL, Wirtschaftspolitik (Grüner 1999-)
MADOC publication series:	Department of Economics > Working Paper Series
Subject:	330 Economics
Classification:	JEL: D71 , D72,
Keywords (English):	coalition formation , minimal winning coalition , supermajority coalition , private information
Abstract:	This paper studies coalition formation under asymmetric information. An outside party offers private payments in order to influence the collective decision over an unpopular reform. The willingness to accept such payments is private information. The paper demonstrates that a supermajority coalition induces truth-telling and secures the implementation of the decision for a price close to the full information minimal winning coalition price. On the contrary, if the minimal winning coalition is formed, then no revelation is possible.