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Electoral Competition with Costly Policy Changes: A Dynamic Perspective

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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.

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Journal of Economic Theory, 2023, vol. 214

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Articles publicats en revistes (Matemàtica Econòmica, Financera i Actuarial)

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Electoral Competition with Costly Policy Changes: A Dynamic Perspective