Essays on political economy and matching markets

Abstract

[eng] In the thesis I make use of the tools provided by game theory to study the incentives of members of a variety of institutions. The three works that make up for the core of the dissertation, stress the importance of assessing properly how certain institutional rules might affect the behavior of the agents regulated by the said rules. The relevance of rules on incentives in order to assess institution performance was particularly highlighted by the Nobel laureate Douglass North. In the first main chapter of the thesis I study stable rules in the context of a job market in which workers and firms must be matched with each other, and both firms and workers might collaborate with more than one partner. Such a market is known in the literature as a multiple-partners job market. In this setting, by means of a novel axiomatization of certain stable rules of relevance, the firms-optimal stable rules and the workers-optimal stable rules, it is possible to address new comments regarding how some agents can manipulate the market. In particular, we show that in the firms-optimal stable rules, firms can manipulate the market, which was already known, but not by constantly over-reporting their productivity with the workers. In the second central chapter, I focus on the decision of a Parliament that must decide via voting whether or not to make a reform pass. All members of the Parliament agree that the reform is desirable, but there is an outside interest group that is willing to bribe them in order to make the reform fail the voting. The literature shows that the budget that the interest group might need in order to be sure to block the reform is potentially huge. However, by considering mixed-strategy equilibria, hence focusing on scenarios in which the interest group is not sure about the outcome of the election, I show that a small budget can be very disruptive. In particular, I prove that if the interest group offers an equal part of the budget to each member that votes against the reform, there are two symmetric completely mixed strategy Nash equilibria, and in both of them the reform is blocked with positive probability. Properties about these equilibria are derived in the chapter, such as the effect of enlarging the Parliament. In the last of the main chapters, I study the role of communication networks in information acquisition ahead of an election. An electorate has to guess which state of the world is taking place and its members can individually acquire (costly) information. I focus on determining how the existence of a network that allows electors to share information might affect their behavior. First of all, I prove that, if there is such a network, there is always an equilibrium such that only one elector acquires information. This kind of equilibrium does not exist in the no network case given that acquiring “few” information is cheap enough. Furthermore, I show that if acquiring information is expensive enough, then, both the case with network and the case without, have only a symmetric equilibrium and they coincide. Hence, in the latter case, the introduction of the network has no effect on welfare.