Mattias K Polborn

Political Rulers, Administrators, and the Efficacy of Law

Tiberiu Dragu et al. — Wed, 03 Aug 2011 19:51:18 PDT

How can the law limit the ruler when the ruler prefers to ignore the law? We develop a game-theoretic model of an interaction between a ruler and administrators to analyze how law can limit the ruler even if, in principle, the ruler can choose an illegal policy. In our model, administrators face a coordination problem in choosing a level of implementation effort if the ruler chooses an illegal policy. The possibility of multiple equilibrium levels of implementation effort implies that the ruler may face different equilibrium costs of violating the law for the same values of exogenous parameters. The model indicates that the administrators' equilibrium level of implementation effort can have the determining effect in inducing the ruler to comply with the law. The analysis has some novel policy implications and contributes to a general understanding of the mechanisms by which law can limit the exercise of public authority.

Social ideology and taxes in a differentiated candidates framework

Stefan Krasa et al. — Thu, 16 Jun 2011 10:14:27 PDT

How does ideological polarization on non-economic matters influence the size of government? We analyze this question using a differentiated candidates framework: Two office-motivated candidates differ in their (fixed) ideological position and their production function for public goods, and choose which tax rate to propose. We provide conditions under which a unique equilibrium exists. In equilibrium, candidates propose different tax rates, and the extent of economic differentiation is influenced by the distribution and intensity of non-economic preferences in the electorate. In turn, the extent of economic differentiation influences whether parties divide the electorate primarily along economic or social lines.

Miscounts, Duverger's Law and Duverger's Hypothesis

Mattias K. Polborn et al. — Sun, 12 Jun 2011 11:14:40 PDT

We analyze plurality rule and runoff rule voting games when the vote counting technology is imperfect and each ballot is miscounted with probability $\varepsilon>0$. A strategy profile $s$ is a {\it robust} equilibrium if there is a $\overline \varepsilon >0$ such that $s$ is an equilibrium whenever $\varepsilon <\overline \varepsilon$. We show that all robust equilibria of plurality voting games satisfy {\it Duverger's Law}: In any robust equilibrium, exactly two candidates receive a positive number of votes. Moreover, robustness (only) rules out a victory of the Condorcet loser. All robust equilibria under runoff rule satisfy {\it Duverger's Hypothesis}: First round votes are (almost always) dispersed over more than two alternatives. With three candidates, robustness has strong implications for equilibrium outcomes under runoff rule: For large parts of the parameter space, the robust equilibrium outcome is unique.

The relative importance of cultural and economic issues for the polarization of the U.S. electorate, 1972--2008

Stefan Krasa et al. — Thu, 24 Mar 2011 06:17:55 PDT

We develop a simple model in which voters care about both economic and ``cultural'' policy (non-economic issues such as abortion). Democrats and Republicans are ideologically differentiated and choose positions on economic policy to maximize their respective probability of winning. Voters who are culturally and economically conservative or liberal strongly prefer one of the parties, while the boundary between the set of Democratic and Republican supporters is along a economically-conservative-socially-liberal to economically-liberal-socially-conservative line. The change of the slope of this line over time tells us about changes in the relative importance of cultural and economic issues for vote choice.

We use data from the American National Election Survey to structurally estimate the model and the relative importance of cultural and economic factors. The results show that the distribution of voter preferences in the American electorate was relatively constant over the last 35 years. However, the importance of cultural factors relative to economic issues for the vote choice has increased significantly over the last generation. As a consequence, the fault line through the American electorate has turned and reflects much more the divisions on cultural issues than a generation ago. These results are consistent with a view that parties have become much more internally homogeneous on cultural issues over the last generation, and that this is the factor that is driving polarization. We also show that policy preference intensity has increased substantially over the same time frame.

Candidate Competition and Voter Learning in Sequential Primary Elections: Theory and Evidence

Mattias K. Polborn et al. — Thu, 13 May 2010 14:17:08 PDT

We develop a model of sequential presidential primaries in which several horizontally and vertically differentiated candidates compete against each other. Voters are incompletely informed about candidate valence and learn over time from election results in previous districts. We analyze the effects of learning about candidate quality, and the effects of candidate withdrawal on the vote shares. An empirical analysis of the 2000-2008 US presidential primaries shows that the evolution of vote shares over the sequence of contests is consistent with the predictions of the theoretical model. The withdrawal of a candidate has a bigger effect on the vote shares of candidates in the same political position, vote variability declines over time in a pattern consistent with learning, and a tilt of the electorate towards a particular political position disproportionately increases the vote shares of the weak candidates espousing that position (relative to the strong candidates in that position). We also use the empirical results to simulate a primary that takes place simultaneously in all states.

Institutional Constraints in Times of Crisis: Counter-Terrorism and Electoral Accountability

Mattias K. Polborn et al. — Mon, 22 Mar 2010 19:09:29 PDT

We develop a game-theoretic model of interactions among a government, a representative citizen, and the (non-terrorist) members of the community in which terrorists have their roots and derive several results. First, security can decrease whenever the government faces increased electoral incentives to provide it. Second, if the government can commit to a level of anti-terrorist activities increased electoral incentives to provide more security always reduces the equilibrium probability of a terrorist attack. A central result of our analysis is that some constraints on government actions always improve security even when security is a country's only concern. We thus provide a new security rationale for laws and institutions that, at least to some extent, tie the hands of the government in its struggle against terrorism. Checks and balances on the government's antiterrorism actions, such as judicial review, can increase a country's security, even while directly inhibiting some anti-terror activities.

Competition between specialized candidates

Stefan Krasa et al. — Tue, 23 Jun 2009 01:16:19 PDT

Opposing candidates for a political office often differ in their professional backgrounds and previous political experience, leading to both real and perceived differences in political capabilities. We analyze a formal model in which candidates with different productivities in two policy areas compete for voters by choosing how much money or effort they would allocate to each area if elected.

The model has a unique equilibrium that differs substantially from the standard median-voter model. While candidates compete for the support of a moderate voter type, this cutoff voter differs from the expected median voter. Moreover, no voter type except the cutoff voter is indifferent between the candidates in equilibrium. The model also predicts that candidates respond to changes in the preferences of voters in a very rigid way. From a welfare perspective, candidates are ``excessively moderate'': Almost certainly, a majority of voters would prefer that the winning candidate focus more on his strength than he does in equilibrium.

A political-economy model of taxation and government expenditures with differentiated candidates

Stefan Krasa et al. — Tue, 03 Mar 2009 08:28:39 PST

We develop a model of political competition between two candidates who choose which level of taxation (and implied government spending) to propose as their election platform. Candidates differ in the amount of public good they can produce for a given level of tax revenue. Voters differ in their incomes, as well as in their preference for the public good relative to private consumption.

Even though candidates are office-motivated, they propose strictly differentiated platforms that play to their strengths of providing lots of public good, or managing limited government, respectively. Equilibrium platforms depend on the candidates' production functions and on the preferences of (some) voter types, but -- in contrast to the Downsian model -- not on the distribution of voter types in the population. We also derive comparative statics and empirical predictions.

Political Competition Between Differentiated Candidates

Stefan Krasa et al. — Wed, 01 Oct 2008 03:03:18 PDT

We introduce a framework of electoral competition in which voters have general preferences over candidates' immutable characteristics (such as gender, race or previously committed policy positions) and flexible policy positions. Candidates are uncertain about the distribution of voter preferences and choose policy positions to maximize their winning probability.

We characterize a property of voter utility functions (``uniform candidate ranking'', UCR) that captures a form of separability between fixed characteristics and policy. When voters have UCR preferences, candidates' equilibrium policies converge in any strict equilibrium. In contrast, notions like competence or complementarity lead to non-UCR preferences and policy divergence. In particular, we introduce a new class of models that contains the probabilistic voting model as a special case and in which there is a unique equilibrium that features policy divergence (except in the special case that is the probabilistic voting model).

Learning and Coordination in the Presidential Primary System

Mattias K. Polborn et al. — Wed, 06 Aug 2008 09:03:12 PDT

To analyze the performance of the U.S. presidential primary system, we develop a model with horizontally and vertically differentiated candidates. Voters are uncertain about candidates' valences, and use results in earlier elections to update their beliefs. The temporal organization of primaries affects both voter learning and vote splitting, i.e., several candidates in the same policy position competing for the same voter pool. Sequential voting minimizes vote-splitting in late districts, but voters may coordinate on the wrong candidate. We structurally estimate the model using the 2008 Democratic presidential primaries. Using the parameter estimates, we conduct policy experiments such as replacing the current system with other proposed systems.

An ancient rejection letter

Mattias K. Polborn — Fri, 25 Jul 2008 09:48:57 PDT

I provide a translation of an ancient letter found in my crawlspace that shows how little scientific publishing has changed over two millenia

The option to wait in collective decisions

Matthias Messner et al. — Thu, 31 Jan 2008 17:40:14 PST

We analyze a model in which voters learn over time their preferences regarding an irreversible social decision. Voters can either implement the project in the first period, or they can postpone the decision to the second period. We analyze the effects of different majority rules. We show that individual first period voting behavior may become ``less conservative'' under supermajority rules, and that it is even possible that a project is implemented in the first period under a supermajority rule that would not be implemented under simple majority rule.

We characterize the optimal majority rule, which is a supermajority rule. We also show that, in contrast to individual investment problems, society may be better off if the option to postpone the decision did not exist.

Endogenous categorization in insurance

Mattias K. Polborn — Thu, 24 Jan 2008 04:28:25 PST

This paper analyzes the welfare properties of equilibrium when insurers use observable actions to classify consumers into different risk categories, and consumers' choice is influenced by the insurance market consequences of their actions. Specifically, we analyze this problem at the example of a car insurance market, in which individual preferences over car types are correlated with risk type and used by insurance firms for ratemaking. Equilibrium premiums for each car are determined by the losses that it generates. Consumers take insurance premiums into account when deciding which car to buy. This creates an incentive to buy the car that is preferred by more low risk individuals. From a utilitarian point of view, this incentive is excessive. Depending on parameters, it may even be possible to construct a tax-subsidy scheme with balanced budget that Pareto improves on the market equilibrium.

Political Polarization and the Electoral Effects of Media Bias

Mattias K. Polborn et al. — Fri, 05 Oct 2007 14:41:54 PDT

Many political commentators diagnose an increasing polarization of the U.S. electorate into two opposing camps. However, in standard spatial voting models, changes in the political preference distribution are irrelevant as long as the position of the median voter does not change. We show that media bias provides a mechanism through which political polarization can affect electoral outcomes. In our model, media firms' profits depend on their audience rating. Maximizing profits may involve catering to a partisan audience by slanting the news. While voters are rational, understand the nature of the news suppression bias and update appropriately, important information is lost through bias and can lead to electoral mistakes. Polarization increases the profitability of slanting news and raises the likelihood of electoral mistakes. We also show that, if media are biased, then there are some news realizations such that the electorate appears more polarized to an outside observer, even though citizens' policy preferences do not change.

The Binary Policy Model

Stefan Krasa et al. — Sat, 17 Feb 2007 04:06:03 PST

We introduce a tractable multi-issue model of electoral competition in which candidates are exogenously committed to particular positions on a subset of issues, while they can choose a sequence of binary positions for the remaining issues to maximize their winning probability. A majority-efficient position is defined as one where a candidate cannot make a majority of the electorate better off, taking as given his fixed positions. We characterize conditions for majority-efficient positions to exist. In contrast to models where candidates can choose all relevant positions, the candidates' fixed positions in our framework imply that only some voters are {\em swing voters}. Whether candidates choose majority-efficient or majority-inefficient positions depends on properties of the distribution of these swing voters. We also use our framework to analyze plurality rule and runoff rule in elections with multiple candidates.

Herding and Anti-Herding: A Model of Reputational Differentiation

Mattias K. Polborn et al. — Sat, 17 Feb 2007 03:27:04 PST

Cooperation in Stochastic OLG Games

Mattias K. Polborn et al. — Sat, 17 Feb 2007 03:21:52 PST

This paper builds on Cremer's (1986) seminal analysis which shows that (almost) complete cooperation can be achieved as an equilibrium in a game played by overlapping generations of players if the institution in which players cooperate is infinitely lived.

We analyze a similar model in which the costs of cooperation are subject to random shocks. Even if these random shocks are very small, the range of parameters for which cooperation can be sustained decreases considerably in comparison to the deterministic case. Furthermore, we show how the efficient outcome can be approximated if the level of cooperation can be varied continuously and the cooperation technology has decreasing or constant returns to scale, while this is not possible in the case of increasing returns to scale.

Information and Crowding Externalities

Mattias K. Polborn — Sat, 17 Feb 2007 03:17:58 PST

We analyze a model in which agents have to make a binary choice under incomplete information about the state of the world, but also care about coordination with other agents who have the same problem. In some of these situations, the larger the share choosing the same alternative, the better off are agents. In others, if too many people choose the same alternative, agents could be worse off, due to crowding externalities. Agents receive public and private information about the state of the world. We determine whether agents rely more on private or public information, and whether or not their choice behavior is socially efficient. We characterize existence conditions for equilibria in which either all available information, or only the public information is used for decisions, compare the two equilibria in terms of welfare, and analyze comparative static effects of better information. Surprisingly, increasing signal accuracy may be welfare decreasing.

The Value of Genetic Information in the Life Insurance Market

Mattias K. Polborn — Fri, 09 Feb 2007 19:16:01 PST

Advantageous Effects of Regulatory Adverse Selection

Mattias K. Polborn et al. — Fri, 09 Feb 2007 19:12:51 PST

This paper is concerned with the effects of regulations that prohibit the use of information to risk-rate premiums in a life insurance market. In particular, new information derived from genetic tests is likely to become very relevant in the near to medium term future. Many governments have prohibited the use of this information in ratemaking, thereby generating ``regulatory adverse selection''.

In our model, individuals early in their lives neither know their desired level of life insurance later in life nor their mortality risk, but learn both over time. We obtain both positive and normative results which differ qualitatively from those obtained in standard, static models. In particular, we show that legislation prohibiting the use of results from genetic screening tests for ratemaking purposes in the life insurance market may increase welfare.