Endogenous Political Instability
AbstractIn this paper, we construct a simple dynamic two-party electoral competition model in which the degree of political instability is endogenously determined: which has never been studied so far. We consider the campaign contributions as stock variable which is gradually accumulated by both partyfs 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 indeterminancy 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.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 07-32.
Length: 31 pages
Date of creation: Aug 2007
Date of revision:
Political assets; Dynamic political economy; Differential game; Markovperfect Nash equilibrium; Two-party model;
Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-27 (All new papers)
- NEP-CDM-2007-08-27 (Collective Decision-Making)
- NEP-DGE-2007-08-27 (Dynamic General Equilibrium)
- NEP-POL-2007-08-27 (Positive Political Economics)
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