Political Rents and Voter Information in Search Equilibrium

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Games and Economic Behavior

www.elsevier.com/locate/geb

Political rents and voter information in search equilibrium

Jørgen Juel Andersen, Tom-Reiel Heggedal

^∗

BINorwegianBusinessSchool,Oslo,Norway

a rt i c l e i n f o a b s t ra c t

Articlehistory:

Received22February2017 Availableonline30January2019

JELclassiﬁcation:

D72 D83

Keywords:

Informationsearch Politicalequilibrium Politicalrents Voterturnout

Politicalpartiescommitted tograbrentsmay runforelection, andeven win, ifcitizens areuninformed.But,howisthepoliticalequilibriumaffectedifcitizenscanmitigatethis informationproblemthroughcostlyinformationsearch?Weproposeapoliticalequilibrium theorywithendogenousinformationsearchand turnout.We showthat:(i) thepolitical equilibriumgeneratespoliticaluncertaintycharacterizedbyadistributionofrentpolicies;

(ii)theexpectationofthisrentdistributionisinverselyU-shapedintheinformationsearch cost;(iii) turnoutis lower and rents are higher the moreproportional is the electoral system.

©²⁰¹⁹^TheÂuthors.^Published^byÊlsevierÎnc.^Thisîsânôpenâccessârticleûnder^the^CC BYlicense(http://creativecommons.org/licenses/by/4.0/).

1. Introduction

The concern that politicians may abuseoﬃce to extract rents is ofﬁrst order importance –to ordinary citizens that dependonthepoliticalsystemforwelfareandredistribution,andtoscholarsthatstrivetounderstandpoliticalmechanisms.

This is not only a developing-country problem. Even in the U.S. – which ranks in the top decile on both income and transparency–governmentofficialsarefrequentlyprosecutedandconvictedforcorruption,forexampleincasesofconflict of interest, fraud, campaignfinance violations, andobstructions of justice.Clearly, citizens can onlyhold politicians and partiesaccountableforexcessiverentextractiontotheextentthattheyareinformedaboutthesepractices.Existingevidence does indeed suggest that citizens’ ability to hold candidates and parties accountable depends on the overall supply of information,viathemediaorothersources(asshownby,e.g.,FerrazandFinan,2008,2011,SnyderandStrömberg,2010, andStrömberg,2015).

The association betweenpolitical rentsandvoter information asa politicalequilibriumphenomenon is, however,not very well understood.Onthe onehand,politiciansappeartobe lesscorruptwhencitizensare betterequippedtogather andprocess information,assuggestedby thenegative correlationbetweencorruptionconvictionsandeducational attainment acrossU.S.statesin Fig.1.¹ Ontheother hand,thereisa largeamount ofunexplainedheterogeneity.Forexample, the scatter plot inFig. 1 suggeststhat the variance of observed corruptionis high, andhigher the lower isthe level of educationalattainment.Moreover,existingevidencesuggeststhatthelevelofpoliticalcorruptionmay,perhapssurprisingly, bepositivelyassociatedwithcitizens’levelofpoliticalparticipation.Forexample,Karahanetal. (2006) documentapositive

*

Correspondingauthor.

E-mailaddress:[email protected](T.-R. Heggedal).

1 ThescatterplotinFig.1isbasedondatafromU.S.states,averagedovertheperiod2001to2010.Thenegativeslopeoftheregressionlineisstatistically signiﬁcantatthe10percentlevel.AsdocumentedbyGlaeserandSaks (2006),educationalattainmentisindeedoneofthemostrobustcorrelatesofpolitical corruptionintheU.S.,whichalsoholdswheninstrumentingforeducationwithhistoricalfactors.

https://doi.org/10.1016/j.geb.2019.01.006

0899-8256/©²⁰¹⁹^TheÂuthors.^Published^byÊlsevierÎnc.^Thisîsânôpenâccessârticleûnder^the^CC^BY^license (http://creativecommons.org/licenses/by/4.0/).

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Fig. 1.Corruption and education across US states.

correlation betweencorruptionand voter turnoutacross county elections inthe State ofMississippi, andEscaleraset al.

(2012) demonstratethesamepatternacrossU.S.states.²

We argue that considering citizens’ level of informedness, their electoral participation patterns, and political parties’

policies on corruption and rents as jointly determined equilibrium outcomes is key to gain a deeper understanding of the potential mechanisms behind patterns observed in the data. Howmuch information a citizen gathers – by reading newspapers,listeningto theradio,watchingtelevision,attendingpoliticalmeetings, andsoon –isanendogenouschoice variablethatpresumablydependsonherinformationsearchcostsandherexpectationaboutparties’attitudestowards,and policieson,rentextraction.Additionally,citizens endogenouslychoosewhethertoparticipateorabstainfrominformation acquisitionandvotingaltogether,forexampleiftheyare discouragedbycorruption,orifthey findinformationsearchtoo costly.Finally,itseemsreasonabletoexpectthatpartiestakeintoaccountcitizens’characteristicsandvotingbehaviorwhen competingforoffice.Hence,voters’informedness,theirparticipationpatterns,andparties’politicalrentpoliciesmayallbe functionsofcitizens’informationsearchcosts.Weknowlittleabouthowinformationsearchcostsaffectpolitical-equilibrium outcomesandweaimatfillingthisgapintheliterature.

To thisend, we develop a theory ofequilibrium rents in large (e.g., regional or national)elections, characterized by differentdegreesofproportionalrepresentation.Inourmodel,exanteidenticalpartiesendogenously committo different (orsimilar)politicalrentlevelspriortotheelection,whilecitizensendogenouslychoosewhethertosearchforinformation aboutthe parties’rents,how much informationthey gather,whetherto vote, andwho to votefor.Ourmain theoretical resultisthat,inpoliticalequilibrium, higherinformationsearchcosts leadto higherequilibriumrents,butthat thisrela- tionship isreversedwhenthesearch costincreasesbeyondathresholdvalue. Theintuitionforthereversalisthat,when informationsearch costsbecomesuﬃcientlyhigh(aboveathresholdvalue),increasingitevenfurtherreducesthepropen- sity of those citizens withthe highest search cost to participate in the election. This endogenously increasesthe share of(relatively)informedcitizens intheelection,implyingthat equilibriumpoliticalrentsisexpectedtobe (weakly)lower whenvoterturnoutislower.Inaddition,weshow thatbothturnoutandrentsdependonthepoliticalinstitutions,inour theory characterized by thelevel ofproportionality inthe translationofvotes intopoliticalpower. Speciﬁcally, we show thatproportionalityandturnoutmaybe(weakly)negativelycorrelatedifelectionsareexantecompetitive,consistentwith theevidencein,forexample,Herreraetal. (2013) andCoxetal. (2016).Moreover, weshow thatmoreproportionality is expectedtoleadtoahigherlevelofrents,whichisconsistentwith,forexample,themicroevidencefromItalianelections providedinGagliarduccietal. (2011).

Goingintothedetails ofourmodel,ourpointofdeparture formodeling voterbehavioristhat,inthecontextoflarge elections,avoter’sstrategicmargintendstozero.Astrategicvoter wouldthenonlyacquireinformationiftheinformation search costiszero(asdiscussedby,e.g., FeddersenandPesendorfer,1996,p.418).Hence, inordertohavepositive information search inpoliticalequilibrium, we propose amodelwhere theincentive to participatestems fromanexogenous, non-instrumentalconsumption beneﬁt ofvoting(Riker andOrdeshook, 1968, andFeddersen, 2004). The key variable for voterbehaviorinourmodelistheexpectedcostsofvoting.Weassumethatcitizensperceiveascostlythattheymayend

2 TheanalysisinKarahanetal. (2006) hastheflavorofadifference-in-differenceapproach,contrastingturnoutatthe1987countysupervisorelectionsto turnoutatthe1984presidentialelections,usingthenumberofpoliticalcorruptionconvictions(viaFBIoperationsintheperiod1984to1987)asthemain explanatoryvariable.Theyinterpretthepositiveestimateontheircorruptionvariableasevidenceofademand-sidestory,whererent-seekingcandidates mobilizevotersinordertogainvotesandconsumerents.Escalerasetal. (2012) useapanelofgubernatorialelectionsacrossthefiftyU.S.statesbetween 1979and2005totesttheassociationbetweenthenumberofpublicofficialsconvictedofcorruptionandvoterturnout,relyingonstatefixedeffectsto dealwithtime-invaryingunobservedvariables.Alsothispaperreliesonademand-sidestorytointerprettheirresults,takingcorruptionlevelsasgiven.In contrast,ourtheorysuggeststhatturnoutandcorruptionshouldbeconsideredasjointlydeterminedpoliticalequilibriumoutcomes.

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up votingforaparty withahigh-rent policy.Moreover, ascitizenscannot directlyobservetheparties’policiesthey must engageincostlysearchtogetinformed.Whensearchingforinformation,citizensfacedifferentlevelsofinformationsearch costs (e.g.,dueto differencesin education, cognitive skills,etc.). We deﬁne the informedas thosecitizens that face zero information search costs and the uninformed – theremaining shareof citizens – asthose that face positive information searchcosts.

Citizensface thefollowingkeytrade-off:they mustbalancetheir costofsearchingforinformationaboutone ormore parties againsttheir expectedreductioninvotingcosts ofpotentiallyﬁndinga partywithlow(er) rents.Moreover,asthe uninformed facetwo typesofvotingcosts –theinformationsearch costanddisutilityofvotingforapartywithhigh(er) rents–someofthesecitizensmayoptimallychoosetoabstainintheelection.

The politicalparties form rationalexpectations aboutthe citizens’ voting behavior when maximizing their respective expectedpayoffsfromrents,givingrisetothefollowingtrade-off:apartycancommittolowrentsandexpecttocapturea largershareofthevote,orcommittoahigherlevelofrentsandrelytoalargerextentonthevotesfromtheuninformed.

In thistrade-off, theparties takeinto accountthat the largeris theshareofthe uninformed citizensthat is expectedto abstainintheelection,themoreﬁercewilltheelectoralcompetitionforthevotesoftheinformedbe.

In the political equilibriumof our model, partiesare expectedto commit to different levels of politicalrents within the boundsof a political equilibriumrentdistribution, providing a rationale forwhy the level of rents is expected to be dispersed at anylevel of information characteristic (e.g., educational attainment). The characteristics of this equilibrium rent distribution – its expectation and support – are determined by the information structure. The intuition why rents are not competeddown tozeroisthat, incontrasttoa pureBertrand competition,partiesoperatinginelectoral systems characterized bysome degreeofproportionalityexpecttogetapositive voteshareandsomepoliticalpowerevenifthey don’tofferthebestpolicy.Hence,thereexistnosymmetricpurestrategyequilibria,andtheequilibriumwestudyisonein symmetricmixedstrategies.

Studying the equilibrium rent distribution, a ﬁrst result (as mentioned above) is that there is an inverted U-shaped relationshipbetweentheuninformedcitizens’searchcostandtheparties’expectedrentpolicy.Thisnon-linearityisdueto twocompetingeffectsontheexpectedrentpolicy.Ontheonehand,ahighersearchcostweakenstheuninformedcitizens’

incentivetoacquireinformation.Thepartiesthenhaveaweakerincentivetocommittolowpoliticalrents,pushingupthe equilibriumlevelofexpectedrents.Werefertothisastheinformationeffect onpoliticalrents.Ontheotherhand,ahigher information search cost induces some of the uninformed to abstain in the election.When the shareof the uninformed that are expectedto participateis reduced, the effective shareof fullyinformed voters inthe election increases.This is the participationeffect,whichincreasesthecompetitive pressureonpartiesandpushesequilibriumrentpoliciesdown.As it turnsout, inthepartofthepoliticalequilibriumwheretheparticipationeffectisrelevant (i.e.,when electoralturnout is sensitive to search costs), the participation effect dominates the information effect, implying that a decrease in the informationsearchcostincreasesboththeexpectedrentpoliciessetbythepartiesandoverallelectoralturnout.

Further, at any givenparticipation rate, the equilibriumdistribution of political rents is wider when the information search cost is higher, as the parties may get votes for a broader range of rents when the uninformed voters are less inclinedtosearchforinformation.Thiscanbeinterpretedasthelevelofpoliticaluncertaintybeinghigherwheninformation search iscostly,andsuggeststhatpoliticalrentsareexpectedtodisplayahighervarianceat, forexample,alowerlevelof educational attainment (as in Fig. 1). Moreover, the expected level of political rents is weakly decreasing in the share of informed citizens, since a higher share ofinformed citizens increases the competitive pressure on the parties (again, consistentwithFig.1).

Finally, the political equilibriumdepends onthe political institutions, andour main technical innovation is to model the interactionbetweeninformationsearch andthepoliticalinstitutionsvia theaggregationofvotesintoexpectedpayoff fortheparties.Asourcitizens arehomogeneous,exceptfortheirdifferencesinsearchcosts,the onlyroleofthepolitical institutions isto determinethe expectedpayoff foraparty asa functionof itsexpectedvoteshare.On theone hand,if the expectedpayoffofsettinga givenrentpolicyisproportional tothe resultingvoteshare,thisimpliesthat evensmall parties –i.e., thosethat endogenously setrentshighand, hence,expectto receivea relativelysmallshareofthe votes– can expect strictly positive payoffs afterthe election.One maythink of thisinterms ofa proportional electoral system, whereevensmallpartiescanexpecttoenjoypoliticalpowerif,forexample,includedinalargergovernmentcoalition.On theotherhand,theelectoralsystemmayfavorthelargestparty,asin,forexample,amajoritariantypeofelectoralsystem.

In such a system, the largest party in terms of vote share enjoys a disproportionately large amount of political power, and the competition for the informed voters will hencebe more ﬁerce. Our comparative statics results on the political institutions are then asfollows. First,the expectedrent policy is(weakly) increasing in thelevel ofproportionality asa moreproportional systemgivesmorepoliticalpowertothesmallparties.Morepowertothesmallerpartiesweakensthe parties’incentivetocapturetheinformedcitizensandthusreducesthecompetitivepressureintheelection.Second,turnout intheelectionis(weakly)decreasinginthelevelofproportionality.Again,thisstemsfromthatamoreproportionalsystem islesscompetitiveandwhenthecompetitivepressureisreduced,expectedrentsand,hence,theexpectedcosts ofvoting arehigher,andcitizenschoosetoagreaterextenttoabstainintheelectionduetohigherexpectedcostsofvoting.

Ourtheorycombineskeyelementsfromtheoriesofvoterbehaviorandindustrialorganization(IO)modelsofconsumer search.Asiswellacknowledgedintheliteratureonvoterbehaviorinlargeelections,anindividualcitizenknowingthather votecannot possiblychangethe electionoutcomemaystill chooseto participatedueto non-instrumentalvotingmotives

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(for example,todefend thevalues ofdemocracy perse,asargued by,e.g., Cohen,1973; Sen, 1999).³ Further, that voters do not appreciateending up votingfor a party witha high rents isakin to the perceived cost of votingassumption in Matsusaka (1995) andDeganandMerlo (2011).Giventheseassumptionsonvoterbehavior,thepoliticalmarketissimilar to a consumer goods market, andwe combine thisbehavior withinsights and techniquesfrom theIO consumer search literature(e.g.,Diamond,1971; Varian,1980,andBurdettandJudd,1983).Inparticular,thesequentialstructureofcitizens’

informationacquisitionrelatescloselytoStahl’s(1989) consumersearchsetup.Moreover,ourcitizens’margintoparticipate intheelectionissimilartothemarginforshoppinginJanssenetal. (2005).However,therearemajordifferencesbetweena consumergoodsmarketandapoliticalmarket,bothwithrespecttoinstitutionalfeaturesandagents’incentives.Technically, then,ourmaindeviationsfromtheIOliteratureistheinstitutionaltransformationofvotesintoparties’expectedpolitical powerandthedecisiontheoreticframeworkforvotingbehavior.

The remainderof thepaperisstructured asfollows.InSection 2,we relate ourcontributionto theexisting literature in moredetail. Subsequently,we describe the modelenvironment inSection 3andcharacterize the politicalequilibrium inSection 4.Section5consistsofa seriesofcomparativestaticsexercises, mainlyfocusing ontheeffectoftheleveland thedistributionofinformationsearch costsontheequilibriumlevelanddistributionofrentpoliciessetby theparties.In Section 6, we discusspotential extensions,aswell asthe robustness of ourkey assumptions. This includes a discussion of howour theory suggests a novelmechanism by which parties,or incumbent(s),have a jointincentive tomanipulate informationbychangingthelevelofinformationcostsratherthan–asintheliteratureonmediacapture–thecontentof information.Finally,Section7sumsupandconcludes.

2. Relatedliterature

Whileourwayofmodeling electoralcompetitionandinformationproblemsis,tothebestofourknowledge,new,our proposedtheoryrelatestoanumberofpreviouscontributionsandexistingliteratures–withintheﬁeldofpoliticaleconomy andbeyond. Mostimportantly, ourpaper relatesto the large literature onpolitical competitionand thepolitical agency problemand,morespeciﬁcally,tothe‘pre-electionpolitics’branchofthisliterature (see,e.g.,PerssonandTabellini,2000, andBesley,2006,forthoroughreviews).Thereisalargeliteratureonprobabilisticvotingwhereexogenouspopularity(taste) shocksformthefoundationforparties’rentextractioninpoliticalequilibrium(Polo,1998; Svensson,1998).⁴Ourframework isfundamentallydifferentfromthatofprobabilisticvotingaselectoraluncertaintyinourmodelisanequilibriumoutcome, stemming from the endogenous voting behavior of uninformed citizens that gives rise to a distribution of equilibrium policies.⁵

Adifferentbranch ofthepoliticalagency literaturefocuseson ‘post-electionpolitics’ andtheagency problemsarising from moral hazard and/or incomplete information (e.g., Ferejohn, 1986; Alesina, 1988; Austen-Smith and Banks, 1989;

Banks,1990).⁶ Theseproblemsareabsentinourmodel.First,weabstractaway frommoral hazardconcernsby modeling fullcommitmenttopolicies,asiscommoninthe‘pre-electionpolitics’literature.Second,ratherthanexogenoustypedraws of preferencesor abilities, asis common inmodels of incompleteinformation, citizens in ourmodel face homogeneous partiesthatdifferintheirpoliticalrentpoliciesbecausetheyplayamixedstrategyinpoliticalequilibrium.

Centraltoourmodelisthelinkbetweenthelevelanddistributionofpoliticalinformationinsocietyandvoteractivity.

The positive relationship in our model between information and turnout ﬁnds broad support in the empirical literature. Palfrey andPoole (1987) show that uninformed voters are more inclined to abstain from voting, and also display more variation in their voting behavior, andLassen (2005) and Deganand Merlo (2011) provide evidence ofa positive, causal effect ofinformation on electoral participation.Existing theories that study the relationship betweeninformation and turnout in large elections include, e.g., Palfrey and Rosenthal (1985) and Feddersen and Sandroni (2006a). Degan and Merlo (2011), Feddersen and Sandroni (2006b), Larcinese (2007) and Hodler et al. (2015) are among the few papers that also analyze costly information acquisition in this context.⁷ However, noneof these papers study equilibrium political rents. Similarly, there is a growing literature on media and voter turnout which tends to ﬁnd a positive effect of more media (see, e.g., Snyder and Strömberg, 2010; Gentzkow et al., 2011), although there may be effects pointing

3 Instrumentalvotingmotiveslacksempiricalsupportinthecontextoflargeelections.Extensivedocumentationisprovidedby,e.g.,Aldrich (1993),Blais (2000),DhillonandPeralta (2002),Feddersen (2004),Geys (2006),Merlo (2006),andSmetsandvanHam (2013).Alsonoticethat,intheabsenceofan instrumentalmotive,the‘swingvoter’scurse’(FeddersenandPesendorfer,1996) –i.e.,strategicabstentionbyuninformedvoters–doesnotapply.

4 Severalrecentextensionsoftheprobabilisticvotingframeworkrelatetoourpaperindifferentways,byconsideringeitherendogenousturnoutor differencesinvotingcostsorvoterinformation(SvalerydandVlachos,2009; LindandRohner,2011; Aldashev,2015).Forexperimentalevidenceonthe effectofelectoralcompetitiononpoliticalrentsseeHeggedaletal. (2018).

5 Thenotionofinformedanduninformedvotersispartofthisliteratureaswell(e.g.,Baron,1994,andGrossmanandHelpman,1996),butfocusing on thedimensionofspecialinterestpoliticswithoutpayingattentiontoendogenousinformationsearchandendogenouselectoralparticipation.

6 PerssonandTabellini (2000) andBesley (2006) alsoreviewthisliteraturethoroughly.

7 Arelatedclassoftheoriesstudyvoting,abstention,andcostlyinformationacquisitioninsmall-scaleelections,suchascommittees,where–in contrast toourlarge-electioncontext–avotermayexpecttobepivotal.Thatavoterexpectstobepivotalmayradicallychangetheassociationbetweenturnout andinformation,asin,e.g.,Oliveros (2013),wheresomevotersareshowntobemorelikelytoabstainthemoreinformedtheyare.

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in the opposite direction (e.g.,McMurray, 2013; Piolatto and Schuett, 2015).⁸ There isalso evidence that costs ofinformation acquisition are heterogeneously distributedandthat this distributioncan be relatedto voter activity (Dee, 2004;

Milliganetal.,2004).Finally,thereisrecentevidencethatinformationaboutcorruptionisnegativeforturnout:Consistent withthebehaviorofthevotersinourtheory,Chongetal. (2015),inaﬁeldexperimentfromMexico,documentthatcitizens arelessinclined toparticipateiftheyreceiveexogenousinformationthatpoliticiansare(more)corrupt(whichwouldbea partialequilibriumoutcomeinourmodelwhenexogenouslychangingtheexpectedlevelofrentpolicies).

Ourpaperalsorelatestotheliteratureonrationalinattention,inthatindividualswithrationalexpectationsaboutequi- librium outcomesendogenously choose aninformationacquisition strategy(e.g.,Sims, 2003). Themain differenceisthat, whileourcitizensmakechoicesabouttheamountofinformationtocollectaboutexanteidenticalparties,arationalinat- tentivecitizenwouldfocusattentiononanidentiﬁablesubsetofpartiesorpolicies.Theonlypoliticaleconomypaperweare awareofthatexploresrationalinattentioninpoliticalequilibriumisMat˘ejkaandTabellini (2017),buttheydonotconsider theissueofpoliticalrents.⁹

Finally, our theory relates to the literature on the economic effects of political institutions. While the formation of governments,coalitionsandpoliciesinproportionalrepresentationsystemsiscontextual,partiesthatexpecttobelargerin termsofvoteandseatsharescanexpecttohaveastrongerinﬂuenceonthepoliticalequilibriumpolicy(asdemonstratedby, e.g.,BaronandDiermeier,2001).Interestingly,ourresultscorroboratethetheoretical(asreviewedinPerssonandTabellini, 2000)andempirical(e.g.,PerssonandTabellini,2003; Perssonetal.,2003; KunicovaandRose-Ackerman,2005)resultthat a more proportional aggregationof voteshares intopolitical powerleads to a higherexpected levelof rentsin political equilibrium. Even though our model suggests a different causal mechanism, the underlying logic is somewhat similar:

politicalcompetitionisstifferinmajoritarianrelativetoproportionalsystemsbecausecompetitionwillbemoreresponsive withrespect tothe votingbehaviorof smallergroupsofmore homogeneousvoters(e.g.,PerssonandTabellini, 1999). In oursetting,thesmallgroupofhomogeneousvotersisidentiﬁedasthegroupofinformedcitizenswhereas,intheexisting literature,thisgroupistheonewiththeleastideologicallydispersedvoters(i.e.,withalargermassof‘swingvoters’).¹⁰ 3. Themodelenvironment

Populationcharacteristics.Ourmodeleconomyispopulatedbyaunitmassofcitizenswithhomogeneouspreferences.¹¹ A smallexogenous subset, N≥^2, ^of ^citizens ^form^parties ⁱ=¹,...,N which may be voted into government in popular elections.¹² As the population is assumed to be homogeneous, the exact mechanismby which citizens are selected, or self-select, intopoliticsisinessential.Additionally,redistributionalconcernsdonotapply and,ﬁnally,wedisregardtherole ofideology. Theonlyremainingpoliticaltension,then,isthe levelofpoliticalrents,andtheonlysourceofheterogeneity, aswillbeexplainedbelow,comesfromtheinformationstructure.

Commitment.Asiscommonintheliteratureonpre-electionpolitics,weassumethatpartiesmaycommittoapolicyon politicalrents.Forexample,apartymaycommittolowrentsbycommittingtoreformsaimedatincreasingthechecks-and- balances within andacrossgovernmentbranches, orby selectingmoreorlesshonest orcompetentpartycandidates.The levelofpoliticalrentsthatanygivenpartyi commitsto(i.e.,theparty’srentpolicy),ri,canthusbeinterpretednarrowlyas theexpectedlevelof(excess)politicianwagesorcorruptionimpliedbytheparty’s politicalplatformandcandidateselec- tion,ormorebroadlyastheimpliedlevelofanytypeofgovernmentwaste.Wediscussdifferentinterpretationsofpolitical rentsfurtherinSection6.2.

Preferences. In line with most comprehensive theories in political economy, we assume that parties (or politicians) seeking politicalpower prefer higherto lower rents while citizensprefer lower tohigher rents.¹³We operationalize the latterby assuming thatcitizens incura direct(psychological)disutility ofvotingforaparty withpoliticalrents,andthat thisdisutilityisincreasingintheparty’slevelofrents.Theexactpreferencestructurewillbedefinedinmoredetailbelow, when considering the citizens’objectives. Inaddition totheir disutility of votingfora party withrents,we assume that citizensenjoyanon-instrumentalutility(a“consumptionbenefit”)ofvoting, D,whichmaybeinterpretedasthesatisfaction of complyingwitha civicduty,orfrom affirmingallegianceto thepolitical system.¹⁴ This D isthe onlypositive benefit

8 TheevidenceoftheeffectofInternetavailabilityonelectoralparticipationis,however,moremixed:Falcketal. (2014) ﬁndanegativeeffect,while Campanteetal. (2013) ﬁndthattheeffectispositiveaftersometime,andbotharguethatthenegativeeffectmaybeduetoacrowdingoutofother,more relevantsourcesofpoliticalinformation.

9 Mat˘ejkaandTabellini (2017) proposeaprobabilisticvotingframeworkwithcostlyinformationacquisition,wherevotersoptimallytradeoffthecost ofreducingpolicysignalnoiseagainstaperceived(non-instrumental)“sincereattention”beneﬁtofvoting.Inpoliticalequilibrium,thepoliticalcandidates takevoters’rationalinattentioninto accountandtherebymaximize amodiﬁedsocialwelfarefunction,inordertoattractvotesandwintheelection.

However,theauthorsdonotaddresstheissueofpoliticalrents,andtheyalsodisregardtheeffectofsearchcostsonpoliticalparticipation(byimplicitly assumingfullturnout).

10 Forabroadreviewoftheliteratureontheeconomicandpoliticaldeterminantsofpoliticalcorruption,see,e.g.,Treisman (2000).

11 Wereferto‘citizens’astheentirepopulationentitledtovoteinelectionsand‘voters’asthosewho,inpoliticalequilibrium,turnouttovote.

12 Thenotionofpartiesmaybeinterchangedwithindividuallyrunningcandidates.

13 Asin,e.g.,PerssonandTabellini (2000),BesleyandPersson (2011) andBuenodeMesquitaetal. (2003).

14 See,e.g.,RikerandOrdeshook (1968) forathoroughdiscussionofthecalculusofvotingandoftheimportanceofincludingaD-term.Inadditionto ethicsandpoliticalallegiances,theylistaffirmingapartisanpreference,thesatisfactionofdeciding,andthesatisfactionofaffirmingone’sefficacyinthe politicalsystemaskeyelementsofD.

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ofvoting andwe assumea citizen onlygets D ifsheis informedaboutthe policy ofthe party shevotesfor. Thisrules out purelyrandomvoting.¹⁵Further, D isthesameforall citizensandindependentoftheparties’polices.Fornotational brevity,wedropthat Disconditionalonthatthecitizenhasinformationaboutthepartyshevotesfor.

Informationsearch. Parties’ rent policies ortheir strategic selection of “bad” politician typesis typically behind-the- scenes,hence,citizens needto engageincostly search tobe informed.Intheir process ofacquiringinformation,citizens facedifferentlevelsofinformationsearchcosts. Denotebyc^s thevector ofsearch costs,withc^s_I=^{0 for}^the^informed^citizens (indexed by “I”) andc^s_U >0 forthe uninformed citizens (indexed by “U”). The distributionof search costs inthe populationisgivenbyashare

μ

∈(0,1)thatareinformedwhiletheremainingshare(1−

μ

)areuninformed.Noticethat no citizensare exante informedaboutanypolicies,so itis onlythe individual costof obtaininginformation thatvaries acrossindividuals.¹⁶

Whensearchingforinformation,acitizenincursthecostc^sandobservestherentpolicyr_iofapartyi.Incurringthecost againgivesanotherpolicyquoteofanotherparty,i.e.,searchissequential,andc^sisthemarginalsearchcost.¹⁷Eachsearch givesanindependent drawfromtheequilibriumpolicy distributionwithcdf F(·)andsupport[^r,r]^.^Both^thedistribution andthesupportareendogenousinourmodelandwillbepinneddownlaterwhenwecharacterizetheequilibrium,butit isconvenienttoestablishthenotationforthedistributionhere.Importantly,wedonotsupposeanythingabouttheshapeof F(·),itcouldevenbedegenerate.Letr∼^F(·)denotethestochasticpolicyvariablewithE[r] astheexpectedpolicyquote fromeach additionalsearch action. Further, we assume that a citizen hasrecall over her observations from all previous searchesandthatshewillchoosethepartywiththelowestlevelofrentinherinformationset.

Turnout.Aconvenientwaytoendogenizetheparticipationratesofthecitizensinourmodelistoallowthemtoplay mixedparticipationstrategies.Wedenote

τ

I and

τ

U themixedstrategiesoftheinformedandtheuninformed,respectively, with

τ

= {

τ

I,

τ

U}^.^The^shareôfînformed^relative^toûninformed^citizens^thatparticipateintheelectionwillvaryaccording to the participation strategies.Forlater use,we define the effective shareof informedvoters in theelection as

μ

ˆ(

τ

)≡

μτI

μτI+(¹−μ)τU.

Politicalinstitutions.Oncethosecitizens thatparticipateintheelectionhavecasttheirvotes,thevoteswillbetrans- latedintopoliticalpowerforthedifferentcompetingpartiesaccordingtothespeciﬁcpoliticalinstitutionsoftheeconomy.

A higher level ofpolitical powerimplies a higherlikelihood ofgetting to consumethe levelof rents that the party has committedto,andhenceahigherpayofffortheparty.

Crucially,weassumethatthepoliticalinstitutionsimplysomedegreeofproportionalityinthetranslationofvoteshares intopoliticalpower.Speciﬁcally,weassume:i)anypositivevoteshare,howeversmall, willmapintosomepositivedegree ofpoliticalpowerandii) thehigherthevoteshareapartywins intheelection,themorepoliticalpoweritwill enjoy.¹⁸ Apartyexpectswithsomeprobability toattracttheinformedandbecomethelargestparty,orelseit willgetonlysome shareoftheuninformedvotesandbecomeasmallparty.

The mappingof voteshares into thepower ofthe large (“L”)andthe smaller (“S”)parties is givenby the functions

γ

L

μ

ˆ(

τ

) and

γ

S

μ

ˆ(

τ

)

,respectively,where

γ

L

μ

ˆ(

τ

)

>

γ

S

μ

ˆ(

τ

)

>0 andweassumethatbothfunctionsaremonotonic andtwicedifferentiable.Itwillbeusefultodeﬁneg(

τ

)≡^γ_γ^S_L^μ_μ^ˆ_ˆ₍⁽^τ_τ₎⁾<1 astherelativepoliticalpowerofbeingasmallversus alargeparty intermsofvoteshares,whereahighervalueof g(

τ

)impliesahigherdegreeofproportionality. Noticethat foralarger effectiveshareofinformedvoters,ahighervotesharewillgo totheparty thathasthe lowestrentpolicy.It followsthat _∂^∂μ^g_ˆ <0,andweassume lim

ˆ

μ→¹g=^0.

Tobuild intuitionforhowourinstitutionalsetupworks,considerthefollowingexample.First,note thattheparty with thelowestrentgets(bythelawoflargenumbers,usingthatthereisacontinuumofcitizens)avoteshareof

μ

ˆ(

τ

)+(1−

ˆ

μ

(

τ

))/N,whiletheotherpartiesgetvotesharesequalto(1− ˆ

μ

(

τ

))/N.Since

γ

L

μ

ˆ(

τ

)

>

γ

S

μ

ˆ(

τ

)

>0,thelargestparty intermsofvoteshareholdsmore,butnotall,politicalpower.Then,inthecaseoffullproportionalitywherepoliticalpower directlyfollows fromtheparties’ respectivevoteshares, wewould have

γ

L

μ

ˆ(

τ

)

= ˆ

μ

(

τ

)+(1− ˆ

μ

(

τ

))/N,

γ

S

μ

ˆ(

τ

)

= (1− ˆ

μ

(

τ

))/N and g(

τ

)= _μ_ˆ₍_τ⁽₎₊₍¹^{− ˆ}^μ₁_{− ˆ}⁽^τ_μ^))/₍_τ^N_))/_N^.Alternatively, ina (closeto) majoritarian system,

γ

L

μ

ˆ(

τ

)

wouldbe closeto onewhile

γ

S

μ

ˆ(

τ

)

wouldbeclosetozeroand,hence,g(

τ

)wouldtendtozero.

15 InourdiscussioninSection6,wearguethatourmainresultsholdalsoinamodelwherevoterbehaviorisexogenousand uninformedcitizens voterandomly(seesection6.4).Moreover,ratherthanassumingthatDisdichotomous(i.e.,eitherpositiveorzero,dependingonwhetherthecitizenis informedornot),wecouldmakeitacontinuousfunctionofinformationsearch.Infact,inoursetup,anincreaseinDorareductioninthecostofvoting (asdescribedinmoredetailbelow)wouldleadtothesametypeofpoliticalequilibriumresults.

16 Analternativeistoassumethatallcitizenshaveinformationaboutatleastonepartyand,hence,thatallcitizensparticipateintheelectiontoenjoyD.

Thiswouldruleoutabstention(theparticipationeffect),buttheremainderofthepoliticalequilibriumandtheinformationeffectwouldremainunchanged.

17 Alternatively,wecouldhaveassumed‘noisysearch’,whereacitizenmayobservemorethanonerentpolicyquoteforeachsearch.Inthediscussionin Section6.5,wearguethatourmainresultsdonothingeonourchoiceofsearchtechnology.

18 Thelatterassumptionisconsistentwiththetranslationofvotesharesintoseatsharesasdescribedbythe“cubelaw”(e.g.,Taagepera,1986).

(7)

3.1. Citizens’andparties’objectives

Wenowturntotheparties’andthecitizens’objectives.InthissectionweassumethatthepolicydistributionF(·)^with support[^r,r]^exists,^which^will^be^shown^to^be^the^caseⁱⁿ^Section^4.3.

Citizens’objective. Letthe parameterc^v>0 be ameasure ofa citizen’s disutility ofvotingfora party i witha rent policyr_ithatishigherthanherreferencepolicy.¹⁹Inourframework,citizenspreferlowoverhighrents,andwedefinethe referencepolicyasthelowestpossibleequilibriumrent.Inpoliticalequilibrium,thelowestpossiblerealizationoftherent policy distributionF(·)îs^r.^The^citizens^form^rationalexpectationsofthislowerbound,i.e.,theycalculater,andholdthis astheirreferencepoint.Wecanthendefinetheutilitycost ofvotingforparty i asc^v

ri−^r

,whichisincreasinginboth theparameterc^v andinthedistance

ri−^r .²⁰

The searchstrategyofacitizenistodecideonareservationrentpolicy

ρ

∈^R⁺^,^and^we^write^the^number^of^searches asS(

ρ

),whichisarandomvariable.Whenacitizenobservesarentpolicyequaltoorbelowthereservationrent,shestops searchingandvotesforthebestpolicyinherinformationset.Wedenotethelowestobservedrentrmin.Totalexpectedcost ofvotingforacitizenisthengivenby

E

[

^C

] ≡

^E^[S

( ρ )

]c^s

+

^c^v

E

[

^rmin

|

^S

( ρ )] −

^r

.

(1)

Acitizen’sexpectednetbeneﬁtofvotingisthenD−^E[^C]^. Wewritethecitizens’objectiveas

max{τ,ρ}

τ (

D

−

^E

[

^C

] ) .

(2)

Sincewewillonlyanalyzesymmetricequilibria,theparticipationstrategy

τ

andsearchstrategy

ρ

willbeidenticalacross allcitizenswithidenticalsearchcost;however,thestrategieswilldifferacrosstheinformedandtheuninformedcitizens.

Parties’objective. Weassume thata politicalpartyi commitsto alevelofrentsri andthatittakesthe participation decisionofcitizensasgiven.Thepartyrecognizesthattheelectoraloutcomemaybeuncertainduetothepartlystochastic votingbyuninformedcitizens.Also,theturnoutdecision,andthusthevotesharesoftheinformedanduninformedcitizens, inﬂuences the expected political power. Taking into account uncertainty and participation, we deﬁne (F(ri),

τ

) as the expectedpoliticalpowerofa partyi toextractandconsumepoliticalrents.We canthen deﬁnetheexpectedpayoff ofa party ias

(

r_i

,

F

(

r_i

), τ ) ≡

^ri

(

F

(

r_i

), τ ),

(3)

which can be interpreted asthe party’s expectationof the rents it will be in a position to consume when committing to a platform with r_i (we elaborate on thisinterpretation in Section 4.2 below). Importantly, (3) implies that expected payoff isincreasing inparty i’s rentpolicy foragivenexpectedpower andincreasingin theexpectedpowerfora given level ofrents,butthattheexpectedpowerisafunction oftheparty’s rentpolicy.It isconvenienttoanalyzethecitizens participationandsearchstrategies{

τ

,

ρ

}^before^deﬁning(F(r_i),

τ

),sowepostponethisandfurtherinterpretationsofthe parties’expectationstoSection4.2.Apartyi’sobjectiveistosetri astomaximize(3) taking

τ

asgiven.WedenoteFi the party’smixedrentstrategy,thatis,theprobabilitydistributionoverri∈^R⁺^.

3.2. Thegamestructure

Now,turningtothegamestructure,considerthefollowingpoliticalgamebetweenpartiesandcitizens:

Timing.Twoperiods,t=¹,2,where:

t=¹: ^Nature^chooses^a^vector^of^parameters

D,N,c^s,c^v,

μ

atthebeginningoftheperiod.Partiesandcitizenssimul- taneouslydecideontheirrentstrategies, Fi,andtheirparticipationandsearchstrategies,{

τ

,

ρ

},respectively.

t=²: ^Theêlection^takes^placeând^payoffsâre^realized.

ApartyicommitstoarentpolicyriconsistentwithitsrentstrategyFi,takingtheotherparties’strategiesandthesearch andvotingstrategiesofthecitizensasgiven.Citizensdecidewhethertoparticipateorabstainand,subjecttoparticipation, theysearch,getinformationaboutoneormoreparties’policies,ri,andcasttheirvotes,anticipatingtheequilibriumpolicy distribution that followsfromtheparties’strategies.Aftertheelection, inperiodt=^2,^payoffs^are ^realized.^Since^all ^the strategicbehaviortakesplaceint=^{1 we}^drop^time^subscriptsthroughout.

19 Twoalternativeinterpretationsofc^v,whichbotharefullyconsistentwithoursetup,are,ﬁrst,thatthisparametermeasuresacitizen’sperceivedcost of(oraversiontoward)votingforahigh-rentparty,or,second,thatitisameasureofhowmuchacitizencaresaboutﬁndingtherightpolicyforher.

20 Whether citizensevaluateaparty’srentpolicyrelativetotheirrationalexpectationofthelowerboundoftherentpolicysupport,r,ortoanyother, arbitrarylevellowerthanthisbound(say,zero)isinessentialforthekeyequilibriumcharacteristicsandresults.Notethat,independentofthechoiceof referencepoint,ourformulationimpliesthatexpectingtovoteforapartywithapolicyfartherawayfromthereferencepointisassociatedwithahigher expectedvotingcost.Thisnotionisconsistentwiththeideaofincurringpsychologicalcostsfrommakingvotingerrors(asin,e.g.,DeganandMerlo,2011).

(8)

4. Thepoliticalequilibrium

Wenow continueby definingandcharacterizingthepoliticalequilibriumwithinformationsearch. Wesolvethegame betweencitizens andpartiesin thefollowing way.First, we assumethat a policy distribution withcdf F(·)andsupport [^r,r]êxistsⁱⁿequilibrium.Then,weanalyzethecitizens’searchandvotingstrategy,givenF(·)ând^that^the^supportôf^F(·) includes

ρ

.Next,wesetupthedetailsoftheparties’payoffs,givenF(·)and

ρ

.Afterthat,weanalyzetheparties’strategies further,characterizeF(·),andﬁnd

ρ

.Last,weshowthat F(·)indeedexists,that

ρ

indeedisinthesupport,andderivethe suﬃcientparameterconditionsforexistenceanduniquenessofthepoliticalequilibrium.

Weonlyanalyzesymmetricequilibria.Then,inpoliticalequilibrium,themixedstrategiesofthepartiesaregivenbythe policydistributionFi=^F(·)∀ⁱ^.^We^deﬁne^the^politicalequilibriuminourmodelasfollows:

Deﬁnition1.ApoliticalequilibriumisapolicydistributionF(·)^,^andparticipationandsearchstrategies{

τ

,

ρ

}^such^that:

1.Partieshavethesameexpectedpayoffs;(ri,F(ri),

τ

)=forallriinthesupportof F(·);

2.Partieshavenoincentivetochangetheirpolicies;≥(ri,F(ri),

τ

)forallri inthesupportofF(·),given

ρ

; 3.

ρ

isinthesupportof F(·)^;

4.{

τ

,

ρ

_}solvesthecitizens’problemgivenbyEquation(2).

4.1. Citizens’searchandvotingstrategy

First,we analyzethecitizens’search strategy, conditionalontheir participation.Recallthatone search actiongivesan independentdrawfromthepolicydistribution.Then, using(1) and(2),theexpectednetbeneﬁtoftakingonlyonesearch actioncanbewritten

d

−

E

[

^r

] −

^r

−

^c

,

(4)

wherewe haveused thelineartransformations d≡_c^Dv andc≡_c^c^sv.Here,d andc havethe interpretations oftherelative importanceofthedirectbeneﬁtofvotingandthesearchcost,respectively,totheparametervalueofthedisutilityofvoting forhighrents.

Citizenssearchagainiftherentpolicyfromtheﬁrstsearchislargerthantheirreservationrent.Thereservationrentwill varywiththecitizens’searchcosts,andwedenote

ρ

Iand

ρ

U thereservationrentoftheinformedanduninformedcitizens, respectively.The reservationrentfortheuninformed isdeﬁnedbytherentthatmakes theexpectedbeneﬁtofcontinued searchequaltothesearchcosts:

_ρ_U

r

( ρ

U

−

^ri

)

f

(

r_i

)

dr_i

−

^c

=

⁰

.

(5)

Thereservationrentimpliedby (5) constitutesan optimalstoppingrulethat isindependentofthenumberofpartiesleft to search.Importantly, noparty willset its policy abovethisreservation rent,orelse it wouldnotget anyvotes.Hence, theupper boundofthe equilibriumpolicy distributionis givenby ¯r=

ρ

U and, consequently,the uninformed citizensdo notsearch morethanonceinpoliticalequilibrium(see appendixA1foraformal proof).²¹ Wethencanusethefactsthat _ρ_U

r f(ri)dri=^{1 and}_ρ_U

r rif(ri)dri=^E^{[r] to}^rewrite^{(5) as}

ρ

U

−

^E^[r]

−

^c

=

^0. ⁽⁶⁾

Searchisfreefortheinformedcitizens,implyingthat thereisa possiblegain fromsearchingagainaslongasr_min>r.

Theythusset

ρ

I=^r,^and^will^search^all^parties,^since^Pr{^ri=^r}=^{0 in}^politicalequilibrium(thattheequilibriumdistribution isatomlesswillbeshowninSection4.3).

A citizen mayabstain fromvoting in politicalequilibrium. Since the uninformed only search once,if they choose to participate,itfollowsfrom(4) thattheirparticipationconstraintis

d

−

E

[

^r

] −

^r

−

^c

≥

⁰

,

(7)

or,equivalently,D−^c^v E[^r] −^r

−^c^s_U≥^0,^where^we ^assume ^D>c_U^s tofocusattentiononequilibriawithpositivepartic- ipationoftheuninformed.Hence,(7) impliesthatuninformed citizensaremorelikelytoabstainfromparticipatinginthe electionthehighertheexpectedlevelofrentsisrelativetothelowerboundofthesupport.

Recallthat citizens decide ontheir participation andsearch strategy simultaneously. However, since they cannot con- dition their participationstrategy on observation(s) fromtheir search, the citizens ineffect committo participation (i.e., voting)beforesearching.Importantly,thetimingbetweenthedecisiontoparticipateandthedecisiontosearchisnotrele- vantforthecitizens’choiceofstrategies.Thereasonisthat,conditionalonsearching,thesearchcostissunkandacitizen

21 Thatuninformedagentsdonotsearchmorethanonceisastandardresultinsequentialsearchmodels,see,e.g.,Stahl (1989).

(9)

only gets D if she votes. Thus it will be optimal to votefor one of the sampled parties since the upperbound ofthe equilibriumpolicydistribution,givenby

ρ

U,ensuresthattheparticipationconstraint(7) holds.

Notice thattheexpectednetbenefitofparticipatingfortheinformed isstrictlygreaterthan fortheuninformed, since E[^rmin|^S(·)=^N]<E[^rmin|^S(·)=¹]=Ê[^r]^forânynon-degeneratedistributionofr.Thus,aslongassomeoftheuninformed citizensparticipateinpoliticalequilibrium,alloftheinformedwillparticipate.Thefollowinglemmaestablishesthat

τ

U>0 and,hence,

τ

I=^1.

Lemma1.Inpoliticalequilibriumalloftheinformedcitizensandatleastsomeoftheuninformedcitizensparticipateintheelection.

Proof. SeeappendixA2. 2

Lemma1impliesthatthereareatleastsomeuninformedcitizensparticipatingintheelectionandsearchingforinfor- mation.Theintuitionforthiscanbeexplainedbyconsideringwhatwouldhappenifonlytheinformedcitizensparticipate intheelection.Ifso,thepartyofferingthelowestrentwouldgetallthevotes.ThisgivesaBertrand-typecompetitionthat woulddriverentsdowntozero.Butthentherewouldbenodisutilityofvotingandtheuninformedcitizenswouldbeneﬁt fromdeviatingbyparticipatingintheelectionsince D>c^s_U.Hence,apoliticalequilibriumwhereonlytheinformedcitizens participatedoesnotexist.

ObservethatLemma1suggeststwocandidatesforpoliticalequilibrium:eitherafullparticipationcasewith

τ

I=

τ

U=¹ orapartialparticipationcasewith

τ

I=^{1 and} ⁰<

τ

U<1.Thisisanalogoustothetwocasesforconsumerparticipationof Janssenetal. (2005).Whenconvenient,wewillseparatetheanalysisintothesetwocases.

4.2. Parties’payoffs

Havingestablishedthesearch strategiesofthecitizens,wecannow setuptheparties’payoffsinmoredetail.Aparty conditionsitsrentstrategyonitsexpectationsoftherentpoliciesoftheotherpartiesandofthesearchandvotingstrategies ofcitizens.Again,assume that F(·) exists,sothataparty perceivestheother parties’rentpoliciesasrandomdrawsfrom F(·)^.

Wedeﬁnetheexpectedpoliticalpowerofapartyas

(

F

(

ri

), τ ) ≡

[1

−

F

(

ri

)

]^N⁻¹

γ

L

μ ˆ ( τ ) +

1

−

[1

−

F

(

ri

)

]^N⁻¹

γ

S

μ ˆ ( τ )

,

(8)

where[1−^F(ri)]^N⁻¹istheprobabilitythatriisthelowestrent,conditionalonthedistributionF(·).Using(8),theexpected payoffofapartyisthen

(

r_i

,

F

(

r_i

) , τ ) =

^ri

[1

−

^F

(

r_i

)

]^N⁻¹

γ

L

μ ˆ ( τ ) +

1

−

^[1

−

^F

(

r_i

)

]^N⁻¹

γ

S

μ ˆ ( τ )

.

(9)

There aretwoalternativeinterpretationsofrentpolicyimplementationinthissetup.First,that onlythelargestparty’s rent policy is implemented and all rents accrue to thisparty. In this case, (F(r_i),

τ

) is a multiplicative factor for the expectedpowerofbeingtheonlypartywhosepolicyisimplemented.Second,thatacombinationofparties’rentpoliciesis implemented,forexamplethroughtheformationofacoalitiongovernment.Inthiscase,eachpartyreceives,inexpectation, a shareoftheir ownrentoffer,wherethesharefollowsfromtheparties’politicalpower.Althoughthepolicy outcomeof thosetwointerpretationsmaybedifferent,theexpectedpayoffsforthepartiesareinvariant.Thus,theparties’trade-offis invariant.From(9) weseepartyi’strade-offwhendecidingonpolicy;alowlevelofritoattractthevotesoftheinformed citizensversusahighlevelofri withalowerprobabilityofgettingthelargestvotesharebutatthesametimehigherrents iftherentpolicyisimplemented.

4.3. Characterizingthepoliticalequilibrium

Havinganalyzedthecitizens’strategiesandsetupthedetailsoftheparties’payoffs,givenF(·),wewillnowcharacterize F(·).

A major feature of our model is that there exist no symmetric pure strategy political equilibria. To see why this is the case, considera rentpolicy ˆ^r ^set^by ^all ^the^parties.^If^rˆ=

ρ

U>0,then anyparty willhavean incentive to lowerits rentsmarginallytoattracttheinformedvotersand, hence,getadiscreteincreaseinitsexpectedpayoff.Ifˆr=^0,^then^any partyexpectszerorentsandhastheincentivetoincreaseitsrentpolicytoexploittheleverageoftheuninformedcitizens, implying

ρ

U>0.If^rˆ ^isⁱⁿ^the^range⁰<^rˆ<

ρ

U,bothaforementionedmechanismsprovidetheparties withtheincentive to deviatefrom^r.ˆ ^Thus, âsîs ^standardⁱⁿÎO-search^models ^(see,ê.g., ^Varian,1980; Stahl,1989; Janssenetal., 2005), the distribution F(·)isatomlessinequilibrium.

We now turntomixedstrategies.Recallthat thesymmetry ofourmodel impliesthatall partiesmust playthe same mixedstrategyinequilibriumand,thus,themixedstrategyisgivenbythepolicydistributionF_i=^F(·)∀^i.^In^what^follows, wewillderivesuchamixedstrategyandshowthatapoliticalequilibriumexists.