Two-Party Competition with Persistent Policies

This paper studies the Markov perfect equilibrium outcomes of a dynamic game of electoral competition between two policy-motivated parties. I model incumbent policy persistence: parties commit to implement a policy for their full tenure in office, and hence in any election only the opposition party renews its platform. In equilibrium, parties alternate in power and policies converge to symmetric alternations about the median voter's ideal policy. Parties' disutility from opponents' policies leads to alterna- tions that display bounded extremism; alternations far from the median are never limits of equilibrium dynamics. Under a natural restriction on strategies, I find that robust long-run outcomes display bounded moderation; alternations close to the median are reached in equilibrium only if policy dynamics start there. I show that these results are robust to voters being forward-looking, the introduction of term limits, costly policy adjustments for incumbents, and office benefits.

Keeping Your Options Open

In standard models of experimentation, the costs of project development consist of (i) the direct cost of running trials as well as (ii) the implicit opportunity cost of leaving alternative projects idle. Another natural type of experimentation cost, the cost of holding on to the option of developing a currently inactive project, has not been studied. In a (multi-armed bandit) model of experimentation in which inactive projects have explicit maintenance costs and can be irreversibly discarded, I fully characterise the optimal experimentation policy and show that the decision-maker's incentive to actively manage its options has important implications for the order of project development. In the model, an experimenter searches for a success among a number of projects by choosing both those to develop now and those to maintain for (potential) future development. In the absence of maintenance costs, the optimal experimentation policy has a 'stay-with-the-winner' property: the projects that are more likely to succeed are developed first. Maintenance costs provide incentives to bring the option value of less promising projects forward, and under the optimal experimentation policy, projects that are less likely to succeed are sometimes developed first. A project development strategy of 'going-with-the-loser' strikes a balance between the cost of discarding possibly valuable options and the cost of leaving them open.

Essays in Political Economy and the Economics of Organisations

This thesis groups three papers in applied microeconomic theory that focus on political economy and the economics of organisations. The first chapter studies the equilibrium outcomes of a dynamic game of electoral competition between two policy-motivated parties. I model incumbent policy persistence: parties commit to implement a policy for their full tenure in office, and hence in any election only the opposition party is free to choose a new platform. The model gives rise to novel equilibrium policy dynamics: governments alternate in power; parties compromise, that is, starting from differentiated ideological positions, they gradually move towards proposing platforms which resemble one another; however, they never capitulate, that is, party labels matter and parties maintain distinct policy goals. The second chapter studies a directed search model of competition between sellers that control the quality of buyers' private information about goods. As better informed buyers extract more informational rents from trade, sellers may try to attract buyers by offering better information. First, I establish how the characteristics of exogenously fixed sale mechanisms determine equilibrium information provision. Information provision is higher under competition than under monopoly, yet partial information is provided for many sale mechanisms. Second, when sellers commit to both information provision and mechanisms, I identify simple conditions under which every equilibrium has full information. In these equilibria, sellers capture the efficiency gains of information provision and compete only over non-distortionary rents offered to buyers. Retaining the option to develop a currently inactive project often requires maintaining specialised stocks of knowledge. However, standard models of experimentation treat the choice of one project over another as entailing only an implicit opportunity cost. In the third chapter, I characterise the optimal experimentation policy in a model in which undeveloped projects have explicit maintenance costs and can be irreversibly discarded. Projects which in the absence of maintenance costs would be developed only after more promising projects fail are sometimes developed first and then discarded early. Maintenance costs alter optimal project development by providing incentives to bring the option value of less promising projects forward.Ph

Fixed-point approaches to the proof of the Bondareva–Shapley Theorem

We provide two new proofs of the Bondareva–Shapley theorem, which states that the core of a transferable utility cooperative game has a nonempty core if and only if the game is balanced. Both proofs exploit the fixed points of self-maps of the set of imputations, applying elementary existence arguments typically associated with noncooperative games to cooperative games