A Model of Electoral Competition with Outside Options

Leonard M. Houantchekon

No 1084, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: This paper provides a framework to study a two party electoral competition followed by a bargaining process in which the loser might choose an outside option costly to the winner. I investigate how this institutional structure affects voting behavior and policy outcomes. In equilibrium, the probablity of either candidate being elected decreases with its bargaining power. This paper stresses how uncertainty affects the probability of "civil unrest" which occurs when the loser exerts its outside option. I characterize an efficient mechanism for political bargaining under incomplete information and discuss the implications of the model for the study of political behavior under democratic transition.

Date: 1994-02
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