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Electoral competition with costly policy changes: A dynamic perspective

Author

Listed:
  • Gersbach, Hans
  • Jackson, Matthew O.
  • Muller, Philippe
  • Tejada, Oriol
Abstract
We analyze two-party electoral competition with a one-dimensional policy space, costly policy changes, and random negative shocks to a party's viability over an infinite horizon. We show the existence and uniqueness of stationary Markov perfect equilibria in which parties use so-called simple strategies. Regardless of the initial policy, party choices converge in the long run to a stochastic alternation between two policies, with transitions occurring if and only if parties suffer a negative shock to their viability. Although costs of change have a moderating effect on policies, full convergence to the median voter position does not take place when parties are polarized.

Suggested Citation

  • Gersbach, Hans & Jackson, Matthew O. & Muller, Philippe & Tejada, Oriol, 2023. "Electoral competition with costly policy changes: A dynamic perspective," Journal of Economic Theory, Elsevier, vol. 214(C).
    • Handle: RePEc:eee:jetheo:v:214:y:2023:i:c:s0022053123001126
    DOI: 10.1016/j.jet.2023.105716
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    Cited by:

    1. Gersbach, Hans & Jackson, Matthew O. & Tejada, Oriol, 2020. "The Optimal Length of Political Terms," CEPR Discussion Papers 14857, C.E.P.R. Discussion Papers.
    2. Hans Gersbach & Oriol Tejada & Julia Wagner, 2022. "Policy Reforms and the Amount of Checks & Balances," CER-ETH Economics working paper series 22/373, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    3. Foarta, Dana & Ting, Michael M., 2023. "Organizational capacity and project dynamics," Working Papers 339, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    4. Loeper, Antoine & Dziuda, Wioletta, 2024. "Voters and the trade-off between policy stability and responsiveness," Journal of Public Economics, Elsevier, vol. 232(C).

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    More about this item

    Keywords

    Elections; Costs of change; Political polarization; Markov perfect equilibrium;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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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