IDEAS home Printed from
   My bibliography  Save this paper

A Reputational Theory of Two Party Competition



We study a dynamic game of incomplete information in which two political parties contest elections with endogenously formed reputations regarding the preferences that prevail within each party. Party preferences exhibit serial correlation and change with higher probability following defeat in elections. We show that when partisans care sufficiently about office, extreme policies are pursued with positive probability by the government if 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 fixed benchmark level, and (b) elections are close in that both parties have similar reputations. Two qualitatively different equilibrium dynamics are possible depending on the relative speed with which preferences of parties in government or in the opposition change: One produces regular government turnover and extreme policies along the path of play, another involves a strong incumbency advantage and policy moderation.

Suggested Citation

  • Tasos Kalandrakis, 2008. "A Reputational Theory of Two Party Competition," Wallis Working Papers WP57, University of Rochester - Wallis Institute of Political Economy.
  • Handle: RePEc:roc:wallis:wp57

    Download full text from publisher

    File URL:
    File Function: full text
    Download Restriction: None

    Other versions of this item:

    References listed on IDEAS

    1. John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
    2. repec:cup:apsrev:v:77:y:1983:i:01:p:142-157_24 is not listed on IDEAS
    3. John Duggan & Mark Fey, 2006. "Repeated Downsian electoral competition," International Journal of Game Theory, Springer;Game Theory Society, vol. 35(1), pages 39-69, December.
    4. George J. Mailath & Larry Samuelson, 2001. "Who Wants a Good Reputation?," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 415-441.
    5. Weingast, Barry R. & Wittman, Donald, 2008. "The Oxford Handbook of Political Economy," OUP Catalogue, Oxford University Press, number 9780199548477.
    6. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 1-16.
    7. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    8. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    9. John Duggan, 2000. "Repeated Elections with Asymmetric Information," Economics and Politics, Wiley Blackwell, vol. 12(2), pages 109-135, July.
    10. Avinash Dixit & Gene M. Grossman & Faruk Gul, 2000. "The Dynamics of Political Compromise," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 531-568, June.
    11. repec:cup:apsrev:v:77:y:1983:i:04:p:974-990_25 is not listed on IDEAS
    12. Bernhardt, Dan & Dubey, Sangita & Hughson, Eric, 2004. "Term limits and pork barrel politics," Journal of Public Economics, Elsevier, vol. 88(12), pages 2383-2422, December.
    13. Alesina, Alberto, 1988. "Credibility and Policy Convergence in a Two-Party System with Rational Voters," American Economic Review, American Economic Association, vol. 78(4), pages 796-805, September.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Tasos Kalandrakis & Arthur Spirling, 2009. "Radical Moderation: Recapturing Power in Two-party Parliamentary Systems," Wallis Working Papers WP61, University of Rochester - Wallis Institute of Political Economy.
    2. C├ęsar Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.
    3. Forand, Jean Guillaume, 2014. "Two-party competition with persistent policies," Journal of Economic Theory, Elsevier, vol. 152(C), pages 64-91.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:roc:wallis:wp57. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard DiSalvo). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.