Spatial Equilibrium with Entry

Thomas Palfrey

The Review of Economic Studies, 1984, vol. 51, issue 1, 139-156

Abstract: This paper examines spatial equilibrium in political competition when established parties choose their platforms competitively while rationally anticipating entry of a vote-maximizing third party. The resulting equilibrium is substantially different from the Hotelling "median" equilibrium. Established parties are spatially separated and third parties will generally lose the election. This provides one theoretical explanation for the stability of two-party systems, namely that non-cooperative behaviour between established parties can effectively prevent third parties from winning.

Date: 1984
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:51:y:1984:i:1:p:139-156.

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