[This paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions. Like market institutions, legislative institutions reflect two key components: the goals or preferences of individuals (here, representatives seeking reelection) and the relevant transactions costs. We present three conclusions. First, we show how the legislative institutions enforce bargains among legislators. Second, we explain why, given the peculiar form of bargaining problems found in legislatures, specific forms of nonmarket exchange prove superior to market exchange. Third, our approach shows how the committee system limits the types of coalitions that may form on a particular issue.]

This paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions. Like market institutions, legislative institutions reflect two key components: the goals or preferences of individuals (here, representatives seeking reelection) and the relevant transactions costs. The authors present three conclusions. First, they show how the legislative institutions enforce bargains among legislators. Second, they explain why, given the peculiar form of bargaining problems found in legislatures, specific forms of nonmarket exchange prove superior to market exchange. Third, their approach shows how the committee system limits the types of coalitions that may form on a particular issue.