Voter Polarization and Extremism

We present a theory of endogenous policy preferences and electoral competition with boundedly rational voters who find it costly to process detailed information. Voters are otherwise fully rational, and they strategically choose how much memory to devote to processing political information. We find that even if all voters start with a common prior such that they all prefer a moderate policy over extreme alternatives to the left or the right, and even if voters observe only common signals that in the limit would assure a perfectly rational agent that the moderate policy is indeed best for everyone, a majority of voters eventually become extreme and the electorate becomes polarized: some voters support the left policy, and some support the right policy. Two fully rational parties respond by proposing extreme platforms, and thereafter, the policy outcome in every period is extreme.