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A Reputational Theory of Two Party Competition

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Abstract

We propose a reputational theory of two-party competition. We model the interaction of parties and the electorate as a stochastic game of incomplete information. The parties’ preferred policies (moderate or extreme) are possibly revealed to the electorate only via their policy choices while in government, and partisan preferences change with positive probability following defeat in elections. Due to inertia within party organizations, party preferences display positive serial correlation. When partisans care sufficiently about office, extreme policies are pursued with positive probability by the government only when the ruling party is perceived relatively more extreme than the opposition. In equilibrium such policies occur when (a) both parties are perceived to be more extreme than a long-run benchmark level, and (b) neither party holds a significant advantage regarding its perceived extremism by the electorate. Equilibrium dynamics produce two qualitatively different adjustment paths: one exhibits polarized politics such that there is positive probability of non-moderate policies in the future for a protracted period of time; the other possible adjustment path produces moderation with probability one in all periods. Both adjustment paths are such that one of the two parties (possibly different over time) may win successive elections with high probability in equilibrium.

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  • Tasos Kalandrakis, 2006. "A Reputational Theory of Two Party Competition," Wallis Working Papers WP41, University of Rochester - Wallis Institute of Political Economy.
    • Handle: RePEc:roc:wallis:wp41
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    Cited by:

    1. Delgado-Vega, Álvaro, 2024. "Persistence in power of long-lived parties," European Economic Review, Elsevier, vol. 163(C).
    2. Tasos Kalandrakis & Arthur Spirling, 2012. "Radical Moderation: Recapturing Power in Two‐Party Parliamentary Systems," American Journal of Political Science, John Wiley & Sons, vol. 56(2), pages 413-432, April.
    3. Vincent Anesi, 2018. "Dynamic Legislative Policy Making under Adverse Selection," Discussion Papers 2018-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    4. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.
    5. Eguia, Jon X. & Giovannoni, Francesco, 2019. "Tactical Extremism," American Political Science Review, Cambridge University Press, vol. 113(1), pages 282-286, February.
    6. Forand, Jean Guillaume, 2014. "Two-party competition with persistent policies," Journal of Economic Theory, Elsevier, vol. 152(C), pages 64-91.
    7. Nunnari, Salvatore & Zápal, Jan, 2017. "Dynamic Elections and Ideological Polarization," Political Analysis, Cambridge University Press, vol. 25(4), pages 505-534, October.

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    Keywords

    Parliamentary Dynamics; Reputation; Westminster.;
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