Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171500
Authors: 
Gersbach, Hans
Müller, Markus
Year of Publication: 
2006
Series/Report no.: 
Economics Working Paper Series 06/56
Abstract: 
As the performance of long-term projects is not observable in the short run politicians may pander to public opinion. To solve this problem, we propose a triple mechanism involving political information markets, reelection threshold contracts, and democratic elections. An information market is used to predict the long-term performance of a policy, while threshold contracts stipulate a price level on the political information market that a politician must reach to have the right to stand for reelection. Reelection thresholds are offered by politicians during campaigns. We show that, on balance, the triple mechanism increases social welfare.
Subjects: 
elections
threshold contracts
democracy
information markets
triple mechanism
JEL: 
D72
D82
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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