Targeted side-payments to pivotal voters make reform affordable only where preferences stay observable.

Evidence

Compensations are paid to enough individuals who would, ex post, vote against the policy reform, in order to keep them in. Obviously, the “cheaper” individuals are compensated, i.e., those closer to the cut point of indifference between having or not having the reform. This, however, requires that the preferences of individual are ex post observable, since compensations are made dependent on them. If preferences are not observable, either transfers scheme are not operational or they require some revelation mechanism. — Philippe Aghion, Alberto Alesina, and Francesco Trebbi, Endogenous Political Institutions, 113

Categorization

• XREF: Echoes classic political-economy models of compensation to losers (Rodrik, Dixit-Londregan) and mechanism-design problems of preference revelation.
• SEED: An essay on why buyouts of losing coalitions quietly demand surveillance of who really objects — the informational price of consensus.