Antoine Loeper

Research

Working Papers

• Dynamic Collective Choice with Endogenous Status Quo
  [job market paper] with Wioletta Dziuda

  This paper analyzes an ongoing bargaining situation in which i) preferences evolve over time, ii) the interests of individuals are not perfectly aligned, and iii) the previous agreement becomes the next status quo and determines the payoffs until a new agreement is reached. We show that the endogeneity of the status quo exacerbates the players' ’confl‡ict of interest and decreases the responsiveness of the bargaining outcome to the environment. Players with arbitrarily similar preferences can behave as if their interests were highly discordant. When players become very patient, the endogeneity of the status quo can bring the negotiations to a complete gridlock.

  Under mild regularity conditions, …fixing the status quo throughout the game via an automatic sunset provision improves welfare. The detrimental effect of the endogeneity of the status quo can also be mitigated by concentrating decision rights, for instance, by lowering the supermajority requirement.

• Coordination in Heterogeneous Federal Systems
  

  Journal of Public Economics. 2011. 95(7-8): 900-912.

  We compare centralized and decentralized policy making in a federation in which policy heterogeneity is inherently costly and preferences vary across jurisdictions: all jurisdictions agree that some harmonization is desirable but no one agree on the direction of harmonization. This type of collective choice problem arises when members of a federal system have to coordinate nonbudgetary policies such as laws, regulations, standards, or diplomatic policies. Contrary to the common wisdom, decentralization becomes optimal when coordination becomes very important. When coordination costs are symmetric, decentralization dominates centralization irrespective of the magnitude of externalities and the heterogeneity of preferences. In the case of discontinuous network effects, standardization never Pareto dominates decentralization. Here is an older version which contains more general results.

• Contractual Federalism and Strategy-proof Coordination

  This paper takes a mechanism design approach to federalism and assumes that local preferences are the private information of local jurisdictions. Contractual federalism is defined as a strategy-proof contract among the members of the federation supervised by a benevolent but not omniscient federal authority. We show that even if the size of the information to be elicited is minimal, the incentive compatibility constraint has a bite in terms of ‡flexibility and welfare. Strategy-proof and efficient federal mechanisms are necessarily uniform. There exists inefficient and non-uniform strategy-proof mechanisms, but they are socially worse than non cooperative decentralization. Federal mechanisms which are neutral and robust to coalition manipulations are equivalent to voting rules on uniform policies.

• Federal Directives, Local Discretion and the Majority Rule

  We consider a federation in which citizens determine by federal majority rule a discretionary policy space which partially restricts the sovereignty of member states. Citizens …first vote on the size of the discretionary space (the degree of local discretion), and then on its location on the policy space (the federal directive). Finally, each state votes on its respective policy within the discretionary space. This federal mechanism allows voters to express directly their trade-off between ‡exibility and policy harmonization.

  We show that at the voting equilibrium, the federal directive is negatively sensitive to the preferences of nonmedian voters. Moreover, the degree of local discretion is too limited and insufficiently sensitive to the magnitude of externalities. Hence, the model shows that inadequate and excessively rigid federal interventions can emerge from a neutral and democratic decision process without agency costs or informational imperfections.

• International Cooperation and National Elections

  We analyze the effect of international cooperation between representative democracies in a simple two country model with two possible types of externalities: public good spillovers and coordination costs. Political representation allows sophisticated voters to manipulate the policy of the other country by electing a representative with less intense or more extreme preferences at the national level. We show that cooperation between national representatives exacerbate these detrimental incentives at the electoral stage. Because of this effect, in the public good case, cooperation has no net effect while in the coordination case, cooperation is actually detrimental.

Work in Progress

• Pork as a Lubricant
  with Wiola Dziuda

  We analyze a dynamic voting game with both pork-barrel programs and general interests policies. Legislators' preferences over pork-barrel spending reflect the geographic identity of their constituency, and their policy preferences in a given period depend on their ideology and on a stochastic shock. Consistent with Congressional practices, we assume that the general interest policy stays in place unless further legislative action is taken, while the district-specific spending programs need to be appropriated in every period. We show that under simple majority rule, the availability of pork-barrel programs is socially detrimental: it distorts an otherwise efficient decision process. However, under supermajority rule, the availability of targeted spending can be a effective lubricant to the legislative bargaining process: it makes the bargaining outcome more responsive to shocks.

• Endogenous Status Quo and Inefficient Compromise
  with Wiola Dziuda

  This paper considers a dynamic bargaining game in which in every period, one of three alternatives has to be chosen: two extreme alternatives and a compromise. The compromise yields a payoff which is the average of the payoff of the two other alternatives, minus a constant term which parameterizes its inefficiency. As in Dziuda and Loeper (2010), preferences evolve over time, the interests of individuals are not perfectly aligned, and the previous agreement stays in place until a new agreement is reached. We show that in equilibrium, the compromise can arise with positive probability in every period when it is inefficient while it never arises when it is efficient.

• Agglomeration and Segregation in Group Formation Games

  We consider a game in which a continuum of heterogeneous individuals partition themselves into communities. Communities can be of any size and group externalities can display any type of economies of scale or congestion effects. When group externalities are anonymous, we show that free mobility equilibria are socially optimal when group externalities increase or decrease logarithmically with community size. When they increase less (resp. more) than logarithmically, the equilibrium exhibits excessive agglomeration (resp. excessive fragmentation). These results hold irrespective of the distribution of preferences and the set of available communities. When group externalities are not anonymous, the optimality of free mobility equilibria requires an additional symmetry condition. We characterize conditions under which free mobility equilibria are excessively or ine¢ ciently strati…ed. We apply these results to local public goods economies and translate the logarithmic and the symmetry conditions into conditions on the public good technology and the income distribution under various tax schemes.

• A note on the interplay of vertical and horizontal fiscal externalities

  We generalize a result due to Karakosta and Kotsogiannis (2006) who showed in a two country model with imperfect competition, linear technologies and product market taxation that the horizontal externality effect dominate the vertical one (i.e. that local taxes are too low) if and only if at the multi layer tax equilibrium, the marginal welfare of the local public goods is higher than the one of the federal public good. We show in a simple proof that this result generalize to any number of country, firms, any technologies and any kind of taxation.

• Envelope Theorems for Parametrized Choice Sets
  with Paul R. Milgrom

  Existing envelope theorems apply to fixed choice sets or to convex maximization programs (Milgrom and Segal 2002). We derive envelope theorems for parametrized choice sets without imposing any convex or topological structure on the choice sets. We show that the traditional envelope theorem formula hold at any point where the generalized Lagrange multipliers and the derivative of the constraint are continuous. We provide conditions under which the value function is differentiable or absolutely continuous. We apply these theorems to topological spaces and mechanism design problems.