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Prof. Zhaotian Luo
Assistant Professor
Department of Political Science
The University of Chicago

We study the spontaneous emergence of power alternation from the need for cooperation by developing a model in which two parties repeatedly cooperate and negotiate the position of power, defined as the control right of a productive regime. Unless the party in power, “incumbent,” compromises, the party out of power, “opposition,” would withdraw from cooperation. Central to our analysis are two impediments: the incumbent’s hold-up problem and information asymmetry. We establish a recursive structure of the model, taking into account the endogenous roles—incumbent or opposition—the two parties play. We find that alternation of power is necessary to sustain cooperation in the long run, while within-period compromise is essential for efficiency. In efficient self-enforcing agreements, incumbents always compromise minimally with oppositions insofar as to have cooperation sustained, while two norms endogenously emerge, prescribing an implicit bargaining protocol and the persistence of power. We characterize the implied history-dependent dynamics of political compromise and power alternation and illustrate the results in historical contexts.