Public Economics

Paper 7
Lecture 3

Multi-dimensional policy spaces and the
Probabilistic Voting Model

Outline

Critique of the median voter model


The probabilistic voting model

The Median Voters Theorem
The two parties will propose the same platform
and that platform is equal to the
most-preferred policy of the median voter.

A Condorcet Winner

A policy that beats all others in
a pair-wise comparison.
When does a Condorcet winner
exist?
The policy space has one dimension.
Voters have single peaked preference
over policy along that one dimension.
Each voter has a most-preferred policy and the
further the policy is away from this ideal point
the worse.
g
) (g W
i
(size of government)
Ideal point
Single peaked.
Not single peaked.
More policy dimensions
A Condorcet winner will not exist in
general.

Policy instability and cycles.
Chaos
The logic of chaos
Two public goods, g and h.
Each voter has an ideal point ) , (
* *
i i
h g
g
h
*
i
g
*
i
h
Ideal point
Indifference
curve
g
*
1
g
*
1
*
2
h h =
h
*
2
g
*
3
h
*
3
g
A
Win set 12
1
3
2
B
The Chaos Theorem
(McKelvey, Journal of Economic Theory, 1976)
When there are at least two issues and at least three
voters every platform can be defeated.
Political instability => incumbents are always defeated.
The median voter model has no predictive power
in the realistic case where the policy space is complex
Reinstated domain assumption =>
collective rationality has to give
Why so much stability?
Institutions prevent instability

Legislative bargaining (next week)
Uncertainty about voter preferences
restores predictability

Probabilistic voting (now)
Probabilistic voting
The Idea
Voters care about two things:

Policy platforms
Fixed characteristics of the parties that are unrelated to
their platform endorsements; they have a bias towards
one of the parties:

Ideology
Charisma or competency of leaders


Voters tend to vote for party that offers the best
platform but only if the difference is big enough to overturn
their bias.



The Idea
Let A
i
be the ideological bias if voters i

Each voter knows A
i

The parties dont know A
i
but they know the
distribution of the biases.

The parties therefore perceive that there only is
a probability that voter i will support its
platform even it is better for that voter than
the one proposed by the other party.

Deterministic vs. probabilistic voting
Voters vote for sure for the platform
that comes closest to their ideal point.
Let
i i
W W iff 1
B A Ai
p > =
be the probability that voter i votes for party A.
Ai
p
i
B
i
A
W W iff 0 < =
Ai
p
i
B
i
A
2
1
W W iff = =
Ai
p
g
h
*
i
g
*
i
h
Party A
Party B
Deterministic vs. probabilistic voting
Voters dont vote for sure for the platform
that comes closest to their ideal point.
i
B A Ai
p A + > =
i i
W W iff 1
i
Ai
p A + < =
i
B
i
A
W W iff 0
i
Ai
p A + = =
i
B
i
A
2
1
W W iff
g
h
*
i
g
*
i
h
Party A
Party B?
Assumptions
Two parties, A and B
Platforms are x
A
and x
B
(many dimensions, e.g.
x={g,h,t})
Different ideologies (or other fixed characteristics).
Two types of voters, J=1,2
W
J
(x) is strictly concave in x (single-peaked).
x
J*
is the most-preferred policy of a voter of type J
n
J
voters of type J with n
1
>n
2
.


Assumptions
The ideological bias of voter i in favour of
party B is A
i

i
B A Ai
x x p A + > = ) ( W ) ( W iff 1
i i
The distribution of the biases is type
specific
A
i
is distributed uniformly between
[l
J
,h
J
] for J=1,2.

17
Distribution of ideological biases
A
i

0

Type 1
l
1
h
1
1/(h
1

+ |l
1
|)
Type 2
l
2
h
2
1/(h
2

+ |l
2
|)
2 2 1 1
l h l h + > +
0 ) ( ) (
2 1
= A = A
i i
E E
) ( 0 ) (
2 1 i i
E E A > > A
Swing versus committed voters:
Equally popular parties:
Type 1 (2) is faithful to party B (A):
i
B A Ai
x x p A + > = ) ( W ) ( W iff 1
i i
The timing
Politicians
announce platforms
Citizens vote
Elected politician
implements his platform
{x
A
, x
B
}
Citizens learn their
ideological bias
i
B A Ai
x x p A + > = ) ( W ) ( W iff 1
i i
Simple majority
Proportional representation
First-past-the-post in multiple districts
Objectives of the parties
Maximize the probability of winning a
majority in the election:

)
2
1
Prob(
2 1
2 2 1 1
> +
+
+
e
t t
n n
n n
A A
t
J
A
(t
J
B
) is the share of voters of type J that
votes for party A (B)

Common popularity shock in favour of
party A: e.

The political Equilibrium
1. Express the vote shares as a function of the
platforms.
2. Find the platform that maximise the probability
of winning for each party
3. Find the Political (Nash) equilibrium by solving
the resulting first order conditions
A pair of platforms that maximise each
parties chance of winning given the platform
choice of the other party and the voting rule
followed by voters.
The vote shares
Step 1: Express share of votes for party A (and B) amongst
type 1 voters (
A
1
and
B
1
) as a function of x
A
and x
B
Fix two platform proposals x
A
and x
B

Find the voter of type 1 who is indifferent between the two parties
when these platforms are proposed
W
1
(x
A
) = W
1
(x
B
) +
s1


s1
= W
1
(x
A
) W
1
(x
B
)
This voter, indexed by s, is the swing voter of type 1.
Who is the swing voters depends on x
A
and x
B


All voters in group 1 with A
i1
< A
s1
vote for party A
All voters in group 1 with A
i1
>A
s1
vote for party B
Step 2: Calculate the vote share for party A and party B
respectively:
Step 3: Repeat step 1 and 2 for voters of type 2 to get
A
2
and
B
2
22
Shares of votes for party A and B among type 1 voters
Voting rule: vote for A if W
1
(x
A
) > W
1
(x
B
) +
i
A
i

0

l
1
1/(h
1

+ |l
1
|)
A
s1
(x
A
, x
B
)
t
A
1
t
B
1

h
1
1 1
1 1
1
h l
l
s
A
+
A +
= t
1 1
1 1 1
) ' ( ) ' (
h l
x W x W l
B A
+
+
=
1 1
1 1 1
1 1
) ' ( ) ' (
1
h l
x W x W h
A B
A B
+
+
= = t t
The platform choice
Party A proposes the platform x
A
that maximises
its probability of winning given the platform
proposed by party B x
B
(

> +
+
+
2
1 n n
Prob max
2 1
2 2 1 1
e
t t
n n
A A
x
A
2 2 1 1
n n max
A A x
A
t t +
2 2
2 2 2
2
1 1
1 1 1
1
) ( ) ( ) ( ) (
max
h l
x W x W l
n
h l
x W x W l
n
B A B A
x
A
+
+
+
+
+
for given x
B

2 2
2 2 2
2
1 1
1 1 1
1
) ( ) ( ) ( ) (
max
h l
x W x W l
n
h l
x W x W l
n
B A B A
x
A
+
+
+
+
+
for given x
B

First order condition:
0
2
2
2
2
1
1
1
1
=
c
c
c
c
+
c
c
c
c
A
A
A
A
x
W
W
n
x
W
W
n
t t
0
1 1
2
2 2
2
1
1 1
1
=
c
c
+
+
c
c
+
A A
x
W
h l
n
x
W
h l
n
Similarly for party B
0
1 1
2
2 2
2
1
1 1
1
=
c
c
+
+
c
c
+
A A
x
W
h l
n
x
W
h l
n
Party A:
Party B:
0
1 1
2
2 2
2
1
1 1
1
=
c
c
+
+
c
c
+
B B
x
W
h l
n
x
W
h l
n
Equilibrium exists: Even if the policy space is big
and complex.
Policy convergence: The two parties propose the
same platform x
A
=x
B
=x*
Policy compromise: The equilibrium policy is a
compromise between what type 1 and type 2
voters want.

The Representation Theorem
The equilibrium platform maximizes

=
2
1
) ( max
J
J
J
x
x W q
A representative democracy with probabilistic voting
behaves as if the government is maximizing a weighed
social welfare function, where the weights represent
the voters responsiveness to marginal platform changes
and group sizes.
J J
J
J
h l
n
q
+
=
Result overview
Groups whose vote decision is mostly
influenced by policy as opposed to ideology
get a bigger weight.
Policy caters to the swing voters as opposed to
the median voter.
Large groups of voters get bigger weight.



What is Next?
Probabilistic voting model and electoral
systems

Legislative Bargaining


g
*
1
g
*
1
*
2
h h =
h
*
2
g
*
3
h
*
3
g
Pareto set
g
*
1
g
*
1
*
2
h h =
h
*
2
g
*
3
h
*
3
g
A
Win set 32
Win set 31
Win set 12
1
3
2