European Journal of POLITICAL European Journal of Political Economy ECONOMY Vol. 12 (1996) 723-727 ELSEVIER The voting mechanism and market allocation: A note Jean J. Gabszewicz *, Tanguy Van Ypersele CORE, Catholic University of Louoain, 34 Voie du Roman Pays, 1348 Louoain-la-Neuve, Belgium Received 15 March 1995; revised 15 August 1995; accepted 15 September1995 Abstract An example is provided identifying a new case of inefficiency arising from the interplay between the political and market mechanisms. Keywords: Political economy 1. Votes on political issues having economic implications are increasingly observed in modern democracies. The provision of public goods, the choice of fiscal, environmental or trade policies, social protection are only a few examples among the plethora of economic issues falling into the domain of modern electoral competition. Generally, the efficiency aspects of public decision-making concern- ing such issues are evaluated as if these issues were decided by a benevolent dictator maximizing social welfare. An interesting question is whether the political mechanism of majority voting on alternative proposals leads spontaneously to the optimal outcome which would be chosen under benevolent dictatorship. Several examples exist in the literature pointing out that the equilibrium strategies of two candidates competing to win an election do not necessarily provide an economically efficient outcome. For instance, there has been a consid- erable literature about the deadweight costs incurred as a consequence of tariff protection reflecting maximization of political support (see Hillman, 1989; Mayer, 1984). Another example is related to the provision of a public good (Shepsle and * Corresponding author 0176-2680/96/$15.00 Copyright © 1996 Elsevier Science B.V. All rights reserved. PII SO176-2680(96)00026-2