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A Folk Theorem for Repeated Elections with Adverse Selection

  • John Duggan

    ()

    (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158)

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    I establish a folk theorem for a model of repeated elections with adverse selection: when citizens are sufficiently patient, arbitrary policy paths through arbitrarily large regions of the policy space can be supported by a refinement of perfect Bayesian equilibrium. Politicians are policy-motivated (so office benefits cannot be used to incentivize policy choices), the policy space is one-dimensional (limiting the dimensionality of the set of utility imputations), and politicians’ preferences are private information (so punishments cannot be targeted to a specific type). The equilibrium construction relies critically on differentiability and strict concavity of citizens’ utility functions. An extension of the arguments allows policy paths to depend on the office holder’s type, subject to incentive compatibility constraints.

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    File URL: http://www.wallis.rochester.edu/WallisPapers/wallis_64.pdf
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    Paper provided by University of Rochester - Wallis Institute of Political Economy in its series Wallis Working Papers with number WP64.

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    Length: 36 pages
    Date of creation: May 2013
    Date of revision:
    Handle: RePEc:roc:wallis:wp64
    Contact details of provider: Postal: University of Rochester, Wallis Institute, Harkness 109B Rochester, New York 14627 U.S.A.

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    1. Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 394, David K. Levine.
    2. Schofield, Norman, 1983. "Generic Instability of Majority Rule," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 695-705, October.
    3. Robert J. Aumann, 1995. "Repeated Games with Incomplete Information," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011476, June.
    4. McKelvey, Richard D, 1979. "General Conditions for Global Intransitivities in Formal Voting Models," Econometrica, Econometric Society, vol. 47(5), pages 1085-1112, September.
    5. 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.
    6. John Duggan, . "Repeated Elections with Asymmetric Information," Wallis Working Papers WP9, University of Rochester - Wallis Institute of Political Economy.
    7. Schofield, Norman, 1978. "Instability of Simple Dynamic Games," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 575-94, October.
    8. Fudenberg, Drew & Yamamoto, Yuichi, 2011. "The Folk Theorem for Irreducible Stochastic Games with Imperfect Public Monitoring," Scholarly Articles 8896226, Harvard University Department of Economics.
    9. Johannes Hörner & Takuo Sugaya & Satoru Takahashi & Nicolas Vieille, 2011. "Recursive Methods in Discounted Stochastic Games: An Algorithm for δ→ 1 and a Folk Theorem," Econometrica, Econometric Society, vol. 79(4), pages 1277-1318, 07.
    10. Banks, Jeffrey S. & Sundaram, Rangarajan K., 1998. "Optimal Retention in Agency Problems," Journal of Economic Theory, Elsevier, vol. 82(2), pages 293-323, October.
    11. Banks, Jeffrey S. & Duggan, John, 2008. "A Dynamic Model of Democratic Elections in Multidimensional Policy Spaces," Quarterly Journal of Political Science, now publishers, vol. 3(3), pages 269-299, October.
    12. McKelvey, Richard D., 1976. "Intransitivities in multidimensional voting models and some implications for agenda control," Journal of Economic Theory, Elsevier, vol. 12(3), pages 472-482, June.
    13. Quan Wen, 2002. "A Folk Theorem for Repeated Sequential Games," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 493-512.
    14. Bernhardt, Dan & Campuzano, Larissa & Squintani, Francesco & Câmara, Odilon, 2009. "On the benefits of party competition," Games and Economic Behavior, Elsevier, vol. 66(2), pages 685-707, July.
    15. Dan Bernhardt & Odilon C�mara & Francesco Squintani, 2011. "Competence and Ideology," Review of Economic Studies, Oxford University Press, vol. 78(2), pages 487-522.
    16. John Duggan & Mark Fey, 2006. "Repeated Downsian electoral competition," International Journal of Game Theory, Springer, vol. 35(1), pages 39-69, December.
    17. Adam Meirowitz, 2007. "Probabilistic Voting and Accountability in Elections with Uncertain Policy Constraints," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(1), pages 41-68, 02.
    18. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
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