An Overlapping Generations Model of Electoral Competition

This paper presents a dynamic model of political competition between two "parties" with different policy preferences. A "party" is explicitly modeled as a sequence of overlapping generations of candidates, all of whom face finite decision horizons. In general, there is a conflict between the interests of the individual policymakers and those of the "party" , which includes subsequent generations of candidates. We characterize this conflict and suggest a scheme of "intergenerational transfers" within the party which can resolve or mitigate this conflict. The paper shows how the "overlapping generations" model can be usefully applied to the political arena.

Political Motivations and Electoral Competition: Equilibrium Analysis and Experimental Evidence

We study both theoretically and experimentally the complete set of Nash equilibria of a classical one-dimensional, majority rule election game with two candidates, who might be interested in power as well as in ideology, but not necessarily in the same way. Apart from obtaining the well known median voter result and the two-sided policy differentiation outcome, the paper uncovers the existence of two new equilibrium configurations, called 'one-sided' and 'probabilistic' policy differentiation, respectively. Our analysis shows how these equilibrium configurations depend on the relative interests in power (resp., ideology) and the uncertainty about voters' preferences. The theoretical predictions are supported by the data collected from a series of laboratory experiments, as we observe convergence to the Nash equilibrium values at the aggregate as well as the individual levels in all treatments, and the comparative statics effects across treatments are as predicted by the theory.Electoral competition, Power, Ideology, Uncertainty, Nash equilibrium, Experimental evidence

Multidimensional Political Competition with Non-Common Beliefs

This paper extends a probabilistic voting model with a multidimensional policy space, allowing candidates to have different prior probability distributions of the distribution of voters' ideal policies. In this model, we show that a platform pair is a Nash equilibrium if and only if both candidates choose a common generalized median of expected ideal policies. Thus, the existence of a Nash equilibrium requires not only that each candidate's belief have an expected generalized median, which is already a knife-edge condition, but also that the two medians coincide. We also study limits of ε-equilibria of Radner (1980) as ε → 0, which we call "limit equilibria." Limit equilibria are policy pairs that approximate choices by the candidates who almost perfectly optimize. We show that a policy pair is a limit equilibrium if and only if both candidates choose the same policy around which they form "opposite expectations" in a certain sense. For a limit equilibrium to exist (equivalently, for ε-equilibria to exist for all ε > 0), it is sufficient, though not necessary, that either candidate has an expected generalized median.

The Political Economy of Corruption and the Role of Financial Institutions

In transition and developing countries, we observe rather high levels of corruption even if they have democratic political systems. This is surprising from a political economy perspective, as the majority of people generally suffers from high corruption levels. Our model is based on the fact that corrupt officials have to pay an entry fee to get lucrative positions. In a probabilistic voting model, we show that a lack of financial institutions can lead to more corruption as more voters become part of the corrupt system. Well-functioning financial institutions, in turn, can increase the political support for anti-corruption measures