Technological advances and the development of social media have made petitions, public protests, and other form of spontaneous activism increasingly common tools for individuals to influence decision makers. To study these phenomena, in this article I present a theory of petitions and public protests that explores their limits as mechanisms to aggregate information. The key assumption is that valuable information is dispersed among citizens. Through petitions and protests, citizens can signal their private information to the policy maker, who can then choose to use it or not. I first show that if citizens’ individual signals are not sufficiently precise, information aggregation is impossible, no matter how large is the population of informed citizens, even if the conflict with the policy maker is small. I then characterize the conditions on conflict and the signal structure that guarantee information aggregation. When these conditions are satisfied, I show that full information aggregation is possible as the population grows to infinity. When they are not satisfied, I show that information aggregation may still be possible if social media are available.

In previous work on cheap talk, uncertainty has almost always been modeled using a single–dimensional state variable. In this paper we prove that the dimensionality of the uncertain variable has an important qualitative impact on results and yields interesting insights into the “mechanics” of information transmission. Contrary to the unidimensional case, if there is more than one sender, full revelation of information in all states of nature is generically possible, even when the conflict of interest is arbitrarily large. What really matters in transmission of information is the local behavior of senders’ indifference curves at the ideal point of the receiver, not the proximity of players’ ideal point.

To study how a firm can capitalize on a long-term customer relationship, we characterize the optimal contract between a monopolist and a consumer whose preferences follow a Markov process. The optimal contract is nonstationary and has infinite memory, but is described by a simple state variable. Under general conditions, supply converges to the efficient level for any degree of persistence of the types and along any history, though convergence is history-dependent. In contrast, as with constant types, the optimal contract can be renegotiation-proof, even with highly persistent types. These properties provide insights into the optimal ownership structure of the production technology.

We propose a new model of legislative bargaining in which coalitions may have different values, reflecting the fact that the policies they can pursue are constrained by the identity of the coalition members. As the delay between offers goes to zero, the equilibrium allocation of the model converges to a generalized version of a Nash bargaining solution in which—in contrast to the standard solution—the winning coalition is endogenous and determined by the relative coalitional values. A form of the holdup problem specific to these bargaining games contributes to generate significant inefficiencies in the selection of the coalition. The model helps rationalize well-known empirical facts that are in conflict with the predictions of standard noncooperative models of bargaining.

This paper presents a political economy theory of fiscal policy. Policy choices are made by a legislature that can raise revenues via an income tax and by borrowing. Revenues can be used to finance a public good, whose value is stochastic, and pork-barrel spending. Policymaking cycles between a “business- as-usual” regime in which legislators bargain over pork, and a “responsible policymaking” regime in which policies maximize the collective good. Transitions between regimes are brought about by shocks in the value of the public good. Equilibrium tax rates are too high, public good provision is too low, and debt levels are too high.

This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining. The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense) and the distributive spending is district-specific transfers (e.g., pork-barrel spending). Investment in the public good creates a dynamic linkage across policymaking periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady-state level of taxation and allocation of spending.

This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining. The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense or air quality) and the distributive spending is district-specific transfers (e.g., pork barrel spending). Investment in the public good creates a dynamic linkage across policy-making periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady state level of taxation and allocation of tax revenues. The model sheds new light on the efficiency of legislative policy-making and has a number of novel positive implications.

In recent decades, democratic countries have negotiated hundreds of international treaties and agreements. This paper analyzes the equilibrium design of treaties negotiated by political incumbents seeking reelection. We show that incumbents are prone to negotiate treaties that are “weak,” in that they may or may not be complied with: this makes it possible to differentiate the alternative candidates in a way that favors the incumbent. We also show that political economy considerations lead to overambitious treaties that rely too much on technology instead of sanctions to motivate compliance. Our theory can rationalize several puzzles associated with treaties.

We analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the holdup problem associated with their investments; however, most countries prefer to free ride rather than participate. If investments are noncontractible, countries face a holdup problem every time they negotiate; but the free-rider problem can be mitigated and significant participation is feasible. Participation becomes attractive because only large coalitions commit to long-term agreements that circumvent the holdup problem. Under well-specified conditions even the first-best outcome is possible when the contract is incomplete.

This paper studies how interest groups allocate campaign contributions when congressmen are connected by social ties. We establish conditions for the existence of a unique Nash equilibrium in pure strategies for the contribution game and characterize the associated allocation of the interest groups’ moneys. While the allocations are generally complex functions of the environment (the voting function, the legislators’ preferences, and the social network topology), they are simple, monotonically increasing functions of the respective legislators’ Katz-Bonacich centralities. Using data on the 109th–113th Congresses and on congressmen’s alumni connections, we estimate the model and find evidence supporting its predictions.