Government formation in the shadow of an uncertain future election
Chronic bargaining failure over government formation in parliamentary systems may result in new elections. Even when we do not actually observe new elections, their possibility in the event of bargaining failure is part of the context of government formation. We propose a simple approach to analysing this, using a tractable, elegant and canonical measure of a party's bargaining expectations, its Shapley value. We show that, even if future elections involve only unbiased shocks to parties’ seat shares, such shocks may have different implications for the current expectations of different parties. Simulating effects of unbiased electoral shocks to parties’ bargaining expectations in empirical cases of government formation, we better explain allocations of cabinet portfolios between government parties.
