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Endogenous Political Instability

Author

Listed:
  • Ryo Arawatari

    (Graduate School of Economics, Osaka University)

  • Kazuo Mino

    (Graduate School of Economics, Osaka University)

Abstract

In this paper, we construct a simple dynamic two-party electoral competition model in which the degree of political instability is endogenously determined. We consider the campaign contributions as stock variable which is gradually accumulated by both party fs direct investment and induced the Markov-perfect Nash equilibrium. We then examine the stability of the symmetric steady state and find that it may be either totally stable or unstable depending on the parameter values involved in the model. We also found that under certain conditions, at least near the symmetric steady state, there exists indeterminacy of equilibrium path: there exist both stable and unstable paths, that is, under given levels of political assets, both high instability political system and low instability political system can emerge depending on expectations of political parties.

Suggested Citation

  • Ryo Arawatari & Kazuo Mino, 2007. "Endogenous Political Instability," Discussion Papers in Economics and Business 07-32-Rev, Osaka University, Graduate School of Economics, revised Nov 2007.
    • Handle: RePEc:osk:wpaper:0732r
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    Keywords

    Political assets; Dynamic political economy; Differential game; Markovperfect Nash equilibrium; Two-party model;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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