Competing for proposal rights: Theory and experimental evidence

Abstract

Competition for positions of power is a common practice in most organizations where decisions are reached through negotiations. We study theoretically and experimentally how different voting rules affect the incentives to compete for the right to propose a distribution of benefits in a sequential bargaining game. Under the majority rule, players with a high chance of proposing are also more likely to be excluded from a coalition when not proposing, which dampens incentives to compete for proposal rights relative to the unanimity case where no one can be excluded from a coalition. However, when rent-seeking efforts affect proposal rights only in the first bargaining round, equilibrium efforts to secure proposal rights are higher under the majority rule because they no longer affect the likelihood of coalition exclusion. Our experimental findings uncover a novel efficiency trade-off absent in theory: While gridlock is stronger under unanimity, majoritarian bargaining elicits higher competition costs regardless of the durability of efforts in affecting proposal rights, rendering both rules equally efficient. The distribution of benefits is affected by the endogeneity of proposal rights contrary to behavioral expectations as subjects gravitate towards equitable sharing and proposers often do not keep the lion’s share. Further experiments reveal that subject behavior is consistent with myopic reasoning and that our results hold robustly in distinct subject samples.