Political equilibria with electoral uncertainty

After an election, when party positions and strengths are known, there may be a centrally located large party at the core position. Theory suggests that such a core party is able to form a minority government and control policy. In the absence of a core party, theory suggests that the outcome be a lottery associated with coalition risk. Stochastic models of elections typically indicate that all parties, in equilibrium, will adopt positions at the electoral center. This paper first presents an existence theorem for local Nash equilibrium (LNE) under vote maximization, and then constructs a more general model using the notion of coalition risk. The model allows for the balancing of office and policy motivations. Empirical analyses of elections in the Netherlands and Israel are used as illustrations of the model and of the concept of a structurally stable LNE. The figures and tables are reproduced from Schofield and Sened (2006) with permission from Cambridge University Press.