Information, institutions and constitutional arrangements

This paper develops a theory of optimal institutional structure for staggered-term (overlapping generations) organizations such as legislative bodies. Our model is a simple stochastic game of multi-principal, multi-agent dynamic relationships. Our results emphasize two key features that are determined by legislative founders at the “constitutional moment”. First, they will agree to institute a mechanism that endows (imperfectly informed) legislators with information about the history of play. Second, we provide conditions in which legislative founders will be indifferent to the structure of legislative procedures.