Power Brokers: Middlemen in Legislative Bargaining


Iaryczower, Matias, and Santiago Oliveros. “Power Brokers: Middlemen in Legislative Bargaining.” Journal of Economic Theory 162, no. March (2016): 209-236.
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We study a model of decentralized legislative bargaining with policy externalities. We establish the emergence of middlemen in legislative bargaining as a robust equilibrium phenomenon. We show that legislative intermediation can impact policy outcomes, and can be inefficient. To fulfill this role, the middleman's policy preferences and bargaining position must be such to make his role of intermediary credible. But the middleman must also directly benefit from policy change. Thus, the political broker is both an intermediary and a client. This result highlights a fundamental difference between intermediaries in politics and exchange economies.

Last updated on 02/16/2016