The Politics of Blame: Bargaining before an Audience

Abstract

An important class of bargaining problems involve two negotiators who send signals to a third party. We show that these signaling incentives significantly influence (1) the proposals that they offer and (2) their decisions to accept or reject proposals. Consider the following case: Congress makes a take-it-or-leave-it offer (a bill) to the president, who either signs or vetoes it. A third party is uninformed about the president's preferences; however, by observing the bill that Congress writes and the president's veto decisions, it can learn about these preferences. Since in our model the president wants to appear moderate to voters, while Congress wants him to appear extreme, Congress sometimes writes a bill that it knows the president will veto. Thus, despite Congress and the president being completely informed, an uninformed third party causes the outcome to be Pareto inefficient. The model generates many empirical predictions, and we test one of these-that the president's approval rating should drop after a veto. wo recent anecdotes pose a challenge to standard models of bargaining. The first involves Slobodan Milosevic's decision to release three U.S. prisoners of war in May 1999, during the heat of the Kosovo conflict. Strangely, he chose to give away a major bargaining chip before peace negotiations had begun; further, he did this without asking for anything in return. The second involves the decision of the Democratic-led Congress in September 1992 to pass a Family Leave bill even though they knew George Bush would veto it (Elving 1995). What is puzzling is that many observers now believe that Bush would have signed a more moderate bill. Why did the Democrats choose this route when a compromise would have given a policy that they and Bush would have preferred to the actual outcome? Both anecdotes, we suggest, can be explained by the bargainers' attempts to appeal to an outside audience. Milosevic was trying to appear reasonable and conciliatory to the Serbian people, and perhaps more importantly, to key members of NATO, such as Germany, Italy, and Greece. The Democrats wanted to make Bush appear like a far-right ideologue, so that voters would not want to reelect him in 1992. We introduce a model that explicitly incorporates an outside audience in a political bargaining process. Two bargainers must agree on a policy. The first proposes a take-it-or-leave-it offer to the second, who accepts it or chooses to keep the status quo. The two bargainers have opposing preferences, while a third actor, the audience, has moderate preferences-that is, he or she prefers a compromise between the ideal policies of the two bargainers. The bargainer who receives the offer weighs two goals: first, he wants a policy outcome consistent with his personal preferences; second, like Milosevic in the above example, he wants to appear moderate to the audience, a goal that may conflict with the first. Meanwhile the bargainer who makes the offer, like the Democrats in the Family Leave bill, wants the second bargainer to appear extreme. When making the offer she weighs this goal against having a policy outcome that she prefers. The following are some of the results of our model: