Abstract

An important, but largely unexplored, class of bargaining problems involvetwo negotiators, who send signals to a third party. One of the most important, but simple, cases within this class is the policy-setting process between Congress and the president. We develop a model where Congress makes a makes a take-it-or-leave-it offer to the president (a bill), who either accepts or rejects (signs or vetoes) it. A third party, a set of voters, is uninformed about the president's preferences; however, by observing the bill that Congress writes and the president's veto decision, the voters can learn about these preferences. In our model the president wants to appear moderate to voters, while Congress wants him to appear extreme. As a consequence, Congress sometimes prefers to write a bill that it knows the president will veto instead of writing a compromise bill that they both prefer to the status quo. Thus, despite Congress and the president being completely informed, the presence of an uninfor...

Citations