chapter 2: a theory of founding party dominancethose operating in relatively open polities. the...
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Chapter 2: A Theory of Founding Party Dominance
In the previous chapter, we laid out the puzzle of Founding Party dominance in
South Africa. Taking into account conventional race-based explanations, we employed a
broader, more instrumental lens to ask: how does the ANC maintain such overwhelming
political dominance while failing to deliver on material promises to large swathes of its
supporters? In the same spirit, this chapter develops our theory of Founding Party
dominance. Although clearly inspired by the South African experience, the theory aims to
explain the survival (and/or demise) of a wide range of founding parties, particularly
those operating in relatively open polities.
The chapter proceeds as follows. First, we place our theory in context by briefly
reviewing the relevant literatures on single-party dominance in general and āfounding
partiesā in particular. Next, we formalize the theory by modeling a simple, one-period
strategic interaction between a Founding Party and a group of citizens. After presenting
the modelās equilibria, we discuss its observable implications for Founding Party
systems. Finally, we present a few of the theoryās more compelling extensions.
Theory in Context
As summarized in Chapter 1, our theory of founding party dominance explores
how citizensā beliefs about the party and their access to information impact the partyās
allocation of state resources and propaganda among voters in its coalition. More
specifically, we identify a so-called ābenefit of the doubtā enjoyed by successful founding
parties. Driven by a partyās status as āfounderā and the beliefs that reputation inspires,
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this benefit allows the party to deliver few goods and services in the present while
maintaining votersā expectations of a much larger delivery in the future. As a result, the
party has more resources for rent seeking and for courting less forgiving voters in its
(generally broad) coalition. Given these advantages, we argue that maintainingāand
manipulatingācitizensā beliefs about the party are critical to founding party dominance.
Historical Roles and Reputations
The idea that a political partyās historical role undergirds its success (or lack
thereof) in the political arena is firmly entrenched in the literature on both dominant
parties in general and founding parties in particular. In a much-quoted phrase, Duverger
(1954) argues āa dominant party is dominant because people believe it is soā¦The party
is associated with an epoch.ā (308). Analyzing a dominant partyās ability to fuse votersā
identification with the party with that of the state, Arian and Barnes (1974) assert that āit
may be virtually necessary for a party to preside over the establishment of a polityā (594).
In his landmark study Political Order in Changing Societies (1968), Samuel
Huntington argues that āthe stability of the one-party [and dominant party] system
derives more from its origins than its characterā (424, 429), and that āthe strength of the
party derives from its struggle for power.ā (426).1 According to Huntington, nationalist
and/or revolutionary (i.e. āfounding) party strength doesnāt come simply from its
achievement of some over-arching political objective, like independence or majority rule
(though that certainly helps). In addition, the party is often the first to mobilize major
population groups, especially those living in rural areas. As such, the party (1) enjoys an
initial monopoly on the political loyalties of large swathes of new citizens; and (2) serves
a unifying structure for diverse groups of future citizens. Even more crucially for our 1 The longer the āstruggle,ā he writes, the stronger the party the longer its political dominance will last.
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purposes, Huntington also claims that founding parties inspire a so-called āpolitics of
aspirationā (324) among its newly politicized constituents, whereby the delivery of
current benefits may matter less than the hope of future gains. Essentially, Huntington
contends that a founding partyās delivery of some regime-level political good (i.e.
independence, regime change, or majority rule) not only makes their promises of
economic goods more credible, but also buys the party time to deliver them.
Huntingtonās arguments about the relationship between a founding partyās
reputation and its political fortunes2 are echoed in analyses of single-party and dominant-
party regimes in sub-Saharan Africaās immediate post-colonial period (Apter 1955, 1965;
Wallerstein 1961; Zolberg 1964, 1966; Beinen 1970). These works demonstrate how
nationalist/liberation parties established varying degrees of dominance based on (1) the
extent and nature, apropo Huntington, of their āstruggle for power;ā (2) their first mover
advantage in mobilizing previously un-politicized populations; (3) their ability to
maintain resulting ābroad churchā coalitions; and (4) the credibility of their promises of
(re-)distribution and economic development. Though tied less directly to a partyās
reputation, Collier (1982) demonstrates how āindependence regimesā (100) in tropical
Africa that established themselves by way of electionsāin other words, by mobilizing
votersāwere more likely to survive than those that emerged via more top-down
processes like merging contesting parties or by force of arms.
Indeed, almost every major study of single-party dominance holds that nationalist
and/or liberation parties establish political dominance due largely to their status as what
we call a āfounding partyā [see, among others Tucker (1961), Blondel (1972), Pempel
(1990), Giliomee & Simkins (1999), Magaloni (2006) and Greene (2007)]. At the same 2 Also expressed in the 1974 compilation, w/ Henry Bienen, āAuthoritarian Politics in Modern Societies.ā
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time, most of these worksāpointing to the lack of clear mechanisms between a partyās
historical credentials and its longer-term success3āhighlight other factors in explaining
the maintenance of such dominance. In addition to the āsocial cleavageā-driven
explanations discussed in Chapter 1 (both general and South Africa-specific), scholars
have emphasized strategic choices of party leaders (Riker 1976; Arian & Barnes 1974;
Pempel 1990)āparticularly centrism and adaptabilityāand the competition-stifling
effects of incumbency resource advantages and patronage (Magaloni 2006; Greene
2007).4
In elucidating the missing mechanisms of founding party dominance, our theory
builds on and complements the literatureās alternative explanations. We briefly review
those explanations below.
Strategic Elites: Centrism, Adaptability, and the Exploitation of State Resources
Many of the most compelling explanations for single-party dominance emphasize
the type of strategic choices made by party leaders to maintain their dominant positions.
3 These scholars treat dominant partiesā status as āfoundingā or āliberationā parties as epiphenomenal and generally immaterial to the maintenance of dominance in the long term. Greene (2007) represents this position well in arguing that it is āunlikely that the mechanisms that produce dominant rule [āincumbentsā initial legitimacy as harbingers of national transformationā] also reproduce it over time.ā As evidence, scholars cite dominant partiesā general pragmatism and their relatively rapid abandonment of āfounding ideologiesā in the interest of maintaining office (Tucker 1961; Magaloni 2006). Pempel (1990) claims that single-party dominance only really becomes a puzzle at all after the effects of founding party reputation fade away. By contrast, I argue that even (and, arguably, especially) a pragmatic and non-ideological dominant party has a clear stake in sustaining its founding party status. 4 Still others have pointed to the effects of political institutions. Scholars of African and Latin American politics have argued that first-past-the-post (FPTP) presidential elections reduce the size of a party system, as parties organize around presidential candidates or are co-opted, post-election, by a powerful executive (Mozzafar 2004; van de Walle 2003; Mainwaring & Shugart 1996). At the same time, scholars of single-party dominance in Southern Africa contend that parliamentary elections governed by closed-list proportional representation (PR) allow dominant parties to mobilize large coalitions as one overwhelming bloc (Giliomee & Simkins 1999; du Toit 1999; Piombo 2005).4 While both logics make sense, institutional explanations for dominance are empirically inadequate. Although most instances of single-party dominance have occurred in FPTP presidential systems, South Africa and Namibia employ PR, while India and Malaysia are FPTP parliamentary systems. More broadly, according to empirical work by Greene (2007) and Magaloni (2006), there is no statistically significant relationship between electoral institutions (measured by district magnitude) and the incidence of single-party dominance.
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More specifically, these studies point to a dominant partyās centrism and its related
ability to keep opposition parties on the margins of the political arena. Rikerās (1976)
landmark analysis of the Indian Congress Party cites party elitesā consistent centrism as
key to maintaining its umbrella structure and ensuring its position as a Condorcet winner
against any potential competitor. In the same vein, Arian and Barnes (1974) contend that
dominant parties in Italy and Israel maintained sufficiently āflexible boundariesā to
capture and remain in the political center, keeping opposition parties on the periphery of
the issue space. Pempelās (1990) wide-ranging study of dominant-party democracies
similarly emphasizes the benefits of ideological flexibility and cultivating broad-based
support. According to Pempel, a ādominant party is the one that plays this game well
enough to keep itself in power long enough so that it can continue enacting and
implementing policies that reinforce its power baseā (pg. 12).
How do dominant parties defend these centrist, flexible positions over time? The
most recent approach to dominant party systems focuses on the partyās exploitation of
state resources. The fusion of party and state in a dominant party system, and the partyās
use of state resources to ensure re-election, is a component of each of the earlier studies
mentioned above. However, none of these articulate a positive theory of how such
exploitation leads to single-party dominance, as Kenneth Greeneās (2007) work purports
to do. Greene argues that dominant parties use state resources to co-opt the bulk of voters
and potential oppositionists, driving remaining opposition parties to the margins of a left-
right issue space. Parties must ācreate a large public sector and politicize the public
bureaucracyā (27) to sustain this ādominant party equilibrium.ā When the state shrinks,
so goes dominance.
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Beatriz Magaloniās (2006) study of āhegemonic-party survivalāāwhich, like
Greeneās, is also based on Mexicoās PRIāalso highlights the central role of a dominant
partyās patronage machine in buying off voters and potential oppositionists, and
exacerbating coordination failure among the opposition. Because Magaloni puts greater
emphasis than Greene on the mechanisms of voter support for the party, she emphasizes
overall economic growthāas opposed to the size of the stateāas the ultimate foundation
of patronage-based dominance. If times are good, Magaloni argues, most voters will not
risk access to an incumbentās patronage in order to support an unknown challenger. If
times are bad, defection is less risky, and the dominant partyās patronage-based
āpunishment regimeāāwhereby disloyal localities are deprived of spoilsāis less
effective. In the latter case, Magaloni echoes Greene in pointing to the size of the public
sector (as well as electoral fraud) as critical to dominance.
Our theory builds on the resource- and patronage-based explanations of political
dominance by introducing an additional dimensionāa founding partyās historical
reputation and the beliefs they inspire among the citizenryāinto the standard state
resources model. Indeed, in many ways our theory serves to unify the classic, qualitative
works of Huntington and Durverger with the more contemporary, formal analyses offered
by Magaloni and Greene. As demonstrated in detail below, we argue that the partyās
strategic allocation of state resources is driven by citizensā beliefs about the party, beliefs
based first and foremost on the partyās historical credentials. Because citizens update
their beliefs over time, we further argue that variation in citizensā access to informationā
and thus their abilities to update accuratelyāimpacts not only the allocation of resources,
but also the partyās decision to manipulate information by investing in propaganda. In
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this way, we view founding party status as a valuable strategic (albeit more ābottom-upā)
resource for an incumbent fortunate enough to enjoy it. Like any other incumbency
advantage, we expect founding party elites to exploit this resource in order to keep
winning votes, deter challengers, and maximize their own share of state resources.
The Model
Preliminaries
In what follows, we present a simple game-theoretic model of strategic interaction
between an Incumbent Founding Party (I) and a Citizen Group (J).5 In this single-period
game, I attempts to secure re-election by J by offering the group a bundle of goods and
services (hereafter the āoffer,ā and labeled x). If J accepts x, I wins the group's electoral
support; if J rejects x, the group opts to support some Opposition (O). In addition to
offering x, I can invest in manipulating J's information environment; we label such
manipulation propaganda.
The game features a dynamic economy, the state of which (denoted
ā¬
Ļ ) is revealed
by Nature. In the interest of parsimony, there are two possible states: a high growth state
(
ā¬
Ļ H , or "goodā times), and a low growth state ( , or ābadā times),
ā¬
Ļ ā Ļ H ,Ļ L( ) . The
former occurs with probability p, while the latter occurs with probability 1-p. Whichever
state, I observes it perfectly while J does not. Formally, J observes the wrong state of the
economy with probability
ā¬
Īµ and observes the correct state with probability
ā¬
1āĪµ . In
effect,
ā¬
Īµ captures J's information environment: the lower
ā¬
Īµ , the more information J has
about the true state of the economy, and the more likely J is to observe that state
5 A Citizen Group is defined demographically according to ethnic, economic, and/or spatial criteria, and is assumed to vote as a bloc (CITES). The model can also be applied if we define J as an individual citizen.
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accurately. In substantive terms,
ā¬
Īµ is reduced (and accuracy is increased) by structural
characteristics like J's level of education; access to media; and exposure to members of
other citizen groups.
We denote the state observed by J (whether correct or incorrect) as
ā¬
Ė Ļ . From
above, we know that J observes
ā¬
Ė Ļ H with probability
ā¬
p Ć (1āĪµ) or
ā¬
(1ā p) Ć Īµ . Similarly,
J observes
ā¬
Ė Ļ L with probability
ā¬
(1ā p) Ć (1āĪµ) or
ā¬
p Ć Īµ .
As described above, the model assumes that citizens hold beliefs about the
Founding Party. Inspired by the partyās founding roleāor, more concretely, its delivery
of some regime-level political good like independence or majority ruleāthese beliefs
represent a citizenās judgment about whether the party is governing in her best interest or
not. More concretely, we posit that the Founding Party can be one of two types: 'True'
(I+) or 'Rent-Seekingā (I-), I ā (I+, I-). A 'True' incumbent (a) always offers citizens a level
of goods and services that reflects the actual state of the economy; and thus (b) will
deliver on its material promises whenever it has the resources to do so. A 'Rent Seeking'
incumbent, by contrast, seeks to exploit its status as a Founding Party to extract rents
from office. As a result, it offers citizens the minimal level of goods and services needed
to secure re-election. Formally, we summarize Jās beliefs as beliefs about Iās type and
denote them with
ā¬
Ī². At the beginning of the game,
ā¬
Ī² captures Jās prior belief that the
Founding Party is of type I+. Conversely,
ā¬
1ā Ī² represents Jās prior belief that the party is
of type I-.
Jās beliefs are dynamic; in other words, J can update its beliefs about Iās type. In
this framework, J observes two pieces of information on which to base that updating.
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First, J observes I's offer x, and second, J observes the state of the economy,
ā¬
Ė Ļ .6 J
updates its belief about I's type before deciding whether or not to support the Founding
Party. We denote J's posterior beliefs as
ā¬
Ź¹ā² Ī² and
ā¬
1ā Ź¹ā² Ī² , respectively.
We model Jās payoff to supporting the Founding Party as , where the flow
payoff f represents J's future benefits from being governed by an āTrueā Founding Party.
Although these benefits may only become material in the future, they nonetheless
represent significant value in the present by way of J's expectations about the potential of
the party to deliver down the line. In other words, f incorporates Huntingtonās āpolitics of
aspirationsā (1968) into the model. Straightforwardly, the value of f is mediated by Jās
(posterior) beliefs about the partyās type. If , J is certain that it will always receive
the highest possible level of goods and services from the government; as a result, J is
certain that the Founding Party will ultimately deliver on its promises. If
ā¬
Ī²'= 0 , J knows
that the party will ultimately never deliver on its material promises, eliminating the value
of those promises to J. Put simply, the product
ā¬
Ī²' f summarizes the value of Jās material
expectations of being governed by the founding party.
We can interpret the (current) offer x not only as a bundle of goods and services
transferred from I to J, but also as a signal about Iās typeāand thus the value to J of Iās
future promises. Moreover, because J observes the state of the economy (and, by A1
below, the size of Iās budget) with varying degrees of uncertainty (i.e
ā¬
Īµ ), the signal x is
noisy: J is uncertain about the extent to which the offer reflects the state of the economy.
This noise/uncertainty opens space for the so-called ābenefit of the doubt,ā whereby J
accepts a ālowā offer in the present while maintaining its expectations of a larger payoff
6These pieces of information are related, as x can be interpreted as Iās signal to J about
ā¬
Ļ .
!
x + " # f
!
" # =1
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in the future. Such acceptance is based in Jās belief that Iās offer is the best it can do
given the governmentās economic constraints. More simply, it is based on Jās beliefs
about the type of founding party it is facing. For example, if J receives a ālowā offer but
observes a government with ample resources, it is reasonable for J to update its beliefs
away from believing I is governing in its interest (i.e. that I is āTrueā) and toward
believing that I is willfully failing to deliver (i.e. that I is āRent-Seekingā), thus reducing
any ābenefit of the doubt.ā
Given this context, we posit that I may very well have an incentive to increase the
noise around its offer xāand thus influence the ability of J to update its beliefsāby
manipulating Jās ability to observe the true state of the economy. We label such
manipulation propaganda and assume it carries a cost m. Thus, I- can invest m monies in
increasing by some amount k. While k will vary according to the effectiveness of the
propaganda, is bounded by 1: no group can be more than 100 percent inaccurate.7
Because I+ always makes a state-reflecting offer, it has no incentive to invest in
propaganda.
If re-elected, we posit that I receivesāin addition to any rentsāthe flow payoff
ā¬
Ļ , which represents both I's ability to divide the budget in future rounds and any non-
material benefits from holding office (cites). We can now express the incumbent's utility
function as follows:
ā¬
UI = (B ā x ām) + Ļ , (1)
where B represents the governmentās budget and is roughly equal to
ā¬
Ļ . Because a True
Founding Party will always make a truthful, state-reflecting offer and does not invest in
7 Or, of course, more than 100% accurate:
ā¬
(Īµ + k) ~ [0,1].
!
"
!
(" + k)
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propaganda, (B - x - m) always equals 0 and I+ maximizes only
ā¬
Ļ .
Out of office and without access to state resourcesāincluding (most of) the levers
of propaganda8āthe Opposition (O) can only compete with the incumbent in the realm
of f, Jās expectations of future benefits from an opposition-ruled government. While J
cannot hold beliefs about O as a type of Founding Party per se, it can certainly hold
beliefs about how O would govern were it in power. More specifically, we posit that J
holds a belief
ā¬
Ī“ about whether O is a 'good' type of party, i.e. whether O will govern in
its interest and make truthful, state-reflecting offers . Conversely, 1-
ā¬
Ī“ captures J's belief
that O is a 'bad' type, i.e. that it is corruptāor simply planning to govern in the interest of
another group. Like
ā¬
Ī²,
ā¬
Ī“ ~[0,1], and J's expected payoff (by way of future benefits) from
rejecting the Founding Party and supporting O is summarized by
ā¬
Ī“ f.
We can now express Jās utility functions as follows:
ā¬
UJ =x + Ź¹ā² Ī² f if J 'Accepts' I's offer (and votes for the Founding Party) Ī“f if J 'Rejects' I's offer (and votes for the Opposition)ā§ āØ ā©
(2)
Thus, J re-elects the Founding Party Incumbent if
ā¬
x + Ź¹ā² Ī² f ā„Ī“f . Below, we refer to this as
the "accept condition."
Strategy Profiles
A strategy profile for I specifies an action aI at each state of the economy,
ā¬
Ļ H and Ļ L : sI = [aI (ĻH );aI (Ļ
L )]. If
ā¬
Ļ = Ļ H , I can (i) make a 'high' offer xH and invest m
in propaganda; (ii) offer xH without investing in propaganda (i.e. m = 0); (iii) make a 'low'
8 Given a sufficiently free mediaāsuch as the print media sector in post-apartheid South AfricaāO could also invest in propaganda to counter Iās efforts (i.e. counter-propaganda). In the interest of simplicity, we could model such counter-propaganda implicitly in two ways: first, via
ā¬
Īµ , and second, via the parameter k, which captures the effectiveness of Iās propaganda (described in greater below). Oās counter-propaganda could theoretically decrease both parameters: alternative information sources could make J a more accurate observer of the economy or they could reduce the effectiveness of Iās manipulations. In any case,
ā¬
(Īµ + k) would decrease.
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offer xL and invest m in propaganda; (iv) offer xL without investing in propaganda; or (v)
abscond with the entire budget (i.e. x = 0 = m). Thus:
ā¬
aI (ĻH )ā (x H ,m);(x H ,0);(xL ,m);(xL ,0);(0,0)[ ] . If
ā¬
Ļ = Ļ L , I can (i) make a 'low' offer xL
and invest m in propaganda; (ii) offer xL without investing in propaganda; or (iii) abscond
with the entire budget. Thus:
ā¬
aI (ĻL )ā (xL ,m);(xL ,0);(0,0)[ ] .
A strategy profile for J specifies one of two actionsāAccept or Rejectāat each
of J's information sets:
ā¬
aJ (ĻJ )ā (Accept, Reject). Denoted
ā¬
ĻJ , these sets include all
(feasible) combinations of I's offer x and J's observed state
ā¬
Ė Ļ .
Thus:
ā¬
ĻJ1 ā (x H , Ė Ļ H ); ĻJ
2 ā (xL , Ė Ļ H ); ĻJ3 ā (xL , Ė Ļ L ); ĻJ
4 ā (0, Ė Ļ H ); and ĻJ5 ā (0, Ė Ļ L )
. The information set
ā¬
(x H , Ė Ļ L ) is not feasible because the high offer xH is not possible if
ā¬
Ļ = Ļ L (see A1 below). As a result, if J observes xH, it will be certain that
ā¬
Ļ = Ļ L . In
addition, in the interest of parsimony it makes sense to combine
ā¬
ĻJ4 and ĻJ
5 into one
information set,
ā¬
Ļ J4 ā (0, Ė Ļ ) . If I absconds with the budget, it fully reveals its type as I-,
making J's observed state irrelevant to its strategic calculation (see below).
Assumptions
In light of the modelās preliminaries, we make the following assumptions:
A1. I faces a fixed budget constraint. In the interest of simplicity, this budget is roughly determined by the true state of the economy, i.e.
ā¬
B ā Ļ . As a result, I cannot offer xH if
ā¬
Ļ = Ļ L .9
9 Returning briefly to the formal treatments of single-party dominance by Magaloni (2006) and Greene (2007), note how this assumption tracks Magaloniās supposition that the incumbentās budget is determined more by the state of the economy in general than by the size of the public sector in particular. This treatment is more appropriate for explaining the maintenance of (and, in some cases, expansion of) single-party dominance in contemporary environments of economic liberalization and public sector reform. In South Africa (Hirsch 2005)āalong with Botswana (Acemoglu, Robinson, and Johnson 2001) and Namibia (du Toit 1999)āthe dominant party (the BDP and SWAPO, respectively) has implemented a number of liberal economic reforms without significant reductions in electoral support (or resorting to widespread electoral fraud or repression); a similar, though admittedly more ambiguous case, can be made for the UNMO in Malaysia (Ritchie 2004). In addition, the main opposition challengers in these systems have
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A2. I observes
ā¬
Ļ and its own type perfectly, and has full information about
ā¬
p, Ī², Īµ, and k . A3. I strictly prefers re-election to absconding with the entire budget. Thus:
ā¬
Ļ > B ā Ļ. A4. J strictly prefers to support I+ and vote out I-, regardless of x. Thus, J strictly
prefers to Reject any x if
ā¬
Ź¹ā² Ī² = 0 (i.e. if J believes I = I- with certainty) and Accept any x if
ā¬
Ź¹ā² Ī² =1 (i.e. if J believes I = I+ with certainty). More formally,
ā¬
x H < Ī“f < xL + f , or xH
f< Ī“ <
xL
f+1.
Order of Play
The game is played as follows (see Figure 1):
1. Nature (N) reveals the state of the economy (
ā¬
Ļ ) and Iās type (I+ or I-)
2. I offers x to J; I decides whether or not to invest amount m in propaganda (k)
3. J observes x and the state of the economy (
ā¬
Ė Ļ ); J updates its beliefs about Iās type
4. J Accepts (A) or Rejects (R) Iās offer
generally advocated for centrist economic policies that do not differ greatly from that of the dominant party.
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Rosenberg Ch. 2
14
Pure Strategy Nash Equilibria
In order to identify the pure strategy equilibria of the game, it is important to
note four āfactsā of the model. First, facing a high offer xH, Jās dominant strategy is to
Accept. Given A1, if J observes xH it can be certain that
ā¬
Ļ = Ļ H (i.e. that times are
āgoodā). Because such a high, state-reflecting offer is made by I+ or by I- exactly
mimicking I+,
ā¬
Ź¹ā² Ī² will always be large enough to satisfy the āaccept conditionā
ā¬
x + Ź¹ā² Ī² f ā„Ī“f . In terms of Figure 1, J always plays Accept at
ā¬
ĻJ1.
Second, and relatedly, Iās action (xH,m)ācombining a high offer with
propagandaāis not feasible. Because observing xH eliminates any uncertainty about the
state of the economy,
ā¬
Īµ is forced to 0 and investing in propaganda becomes nonsensical.
Third, Jās dominant strategy is to Reject the incumbent if it absconds with the
entire budget (i.e. offers x = 0). This action fully reveals the incumbentās type as I- and
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Rosenberg Ch. 2
15
yields J zero utility, regardless of the observed state. Clearly, investing in propaganda in
this case would only reduce the size of I's payoff without affecting Jās decision to Reject,
so m = k = 0. In Figure 1, J always plays Reject at
ā¬
ĻJ4 .
Fourth, if I offers xL, both Accept and Reject are potential best responses for J.
Thus, for any pure strategy equilbrium to hold, J's actions must be consistent across the
two low-offer information sets,
ā¬
ĻJ2 and ĻJ
3 .
In light of these 'facts,' the model has three Pure Strategy Nash Equilibria (PSNE).
The first of these is incredibly straightforward and flows directly from the definition of a
True Founding Party: if
ā¬
Ļ = Ļ H and I = I+, {(xH,0); Accept}10 is a PSNE. In good times,
I+ will always make a high offer, and J will always accept it, regardless of
ā¬
Ī², p, or Īµ .
Thus, a True Founding Party blessed with a high growth economy will always be re-
elected.
More interestingly, we can also identity a PSNE at {(xL,0),(xL,0); Accept},
whereby I- wins re-election by making a low offer in both states and does not invest in
propaganda. Given that J is playing Accept, (xL,0) is I-'s lowest-cost action (recall A3)
and the incumbent has no incentive to deviate to another strategy. For the equilibrium to
hold, the same must be true for J, requiring that the āaccept conditionā hold at both
ā¬
ĻJ2 and ĻJ
3 . Specifically:
Proposition 1: {(xL,0),(xL,0); Accept} is a PSNE iff:
ā¬
xL +Ī²(1ā p)Īµ
(1ā Ī²)p(1āĪµ) + Ī²(1ā p)Īµ + (1ā Ī²)(1ā p)Īµā
ā ā
ā
ā ā f ā„Ī“f at
ā¬
ĻJ2; and (3)
10 In general, equilibria are notated as {Iās strategy; Jās strategy}. Below, equilibira are notated more precisely as {Iās action at
ā¬
Ļ H , Iās action at
ā¬
Ļ L ; Jās action at
ā¬
ĻJ2; Jās action at
ā¬
ĻJ3}. We employ this form
because Jās actions at
ā¬
ĻJ1 and
ā¬
ĻJ4 are constant (always Accept and always Reject, respectively) given the
āfactsā of the model presented above.
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Rosenberg Ch. 2
16
ā¬
xL +Ī²(1ā p)(1āĪµ )
(1ā Ī²)pĪµ + Ī²(1ā p)(1āĪµ ) + (1ā Ī²)(1ā p)(1āĪµ)ā
ā ā
ā
ā ā f ā„Ī“f at
ā¬
ĻJ3, (4)
where the terms in parentheses capture J's posterior beliefs (
ā¬
Ź¹ā² Ī² , via Baye's Rule) at the
specified information sets. Mathematically, it is clear that, ceteris paribus, Proposition 1
requires a relatively large
ā¬
Ī². Intuitively, if I- is to secure re-election with a low offer and
without employing propaganda, Jās prior belief that the incumbent is a True Founding
Party must be relatively firm. Re-arranging Equations 3 and 4 to pin down thresholds for
ā¬
Ī² (i.e.
ā¬
Ī²*), we find:
ā¬
Ī²* ā„
Ī“f ā xL
fp(1āĪµ ) + (1ā p)Īµ[ ]
Ī“f ā xL
fp(1āĪµ ) + (1ā p)Īµ
at
ā¬
ĻJ2; and (5)
ā¬
Ī²* ā„
Ī“f ā xL
fpĪµ + (1ā p)(1āĪµ)[ ]
Ī“f ā xL
fpĪµ + (1ā p)(1āĪµ)
at
ā¬
ĻJ3. (6)
To help interpret this equilibrium, we assume that ā¤ Ā½; this restriction makes
sense for two reasons. First, outside of totalitarian settings, it is highly unlikely that J is
so inaccurate about the state of the economy that āthe probability that J observes the
opposite state from realityāis greater than Ā½. Second, the restriction ensures that
ā¬
Ī²* at
ā¬
ĻJ2āwhere J receives a low offer while observing a growing economyāmust be greater
than
ā¬
Ī²* at
ā¬
ĻJ3āwhere J gets a low offer and observes a stagnant economy. To accept a
low offer, it is highly reasonable that J's priors about I's type would have to be more
favorable when observing
ā¬
Ė Ļ H than when observing
ā¬
Ė Ļ L . Indeed, in the former scenario,
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Rosenberg Ch. 2
17
Jās prior belief that the incumbent is āTrueā must be quite robust to withstand clear
evidence to the contrary.
Given our restriction on
ā¬
Īµ , we can determine the values of p and
ā¬
Ī² for which
{(xL,0),(xL,0); Accept} is Nash. In the top panel of Figure 2, we hold
ā¬
Īµ at 0.25 (in the
middle of the restricted range) and plot p against
ā¬
Ī². Lines 2a and 2b track the values of
ā¬
Ī²
that satisfy inequalities 5 and 6, respectively, with the areas above each line capturing
ā¬
Ī²*
at the specified information sets. As the area above Line 2a satisfies both inequalitiesā
again, if J accepts xL at
ā¬
ĻJ2, it must do so at
ā¬
ĻJ3 as wellāthis area summarizes the
conditions for p and
ā¬
Ī² under which {(xL,0),(xL,0); Accept} is a PSNE.
These conditions are characterized by a positive, āpush-pullā relationship between
p and
ā¬
Ī²: holding
ā¬
Īµ constant, the more likely it is that
ā¬
Ļ = Ļ H (i.e. the higher is p), the
stronger must be J's belief that I = I+ (i.e. the higher must be
ā¬
Ī²) for the equilibrium to
hold. In good times, then, only a group with very favorable prior beliefs about the
Founding Party will accept a low, rent accruing offer from I-; groups with less favorable
beliefs will reject it (and require the party to make a higher offer to retain its support; see
Proposition 2 below). In this way, the equilibrium conforms to the āswingā voter
approach to party responsiveness and accountability ((Lindbeck & Weibull 1987; Dixit &
Londegran 1996), whereby a party neglects its ācoreā supportersāwho are likely to vote
for the party regardlessāin favor of less partisan groups. In the Founding Party context,
this equilibrium also presents us with a variation on the ābenefit of the doubtā scenario
discussed above. In this case, J is sufficiently wedded to the Founding Party that it
believes the party will deliver in the future despite receiving a obviously low-ball offer in
the present.
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Rosenberg Ch. 2
18
In bad times, I- mimics I+ with a low, state-reflecting offer. Per Figure 2, a low
offer will secure acceptance by groups with a wide range of priors when times are bad
and the incumbentās budget is small.
The two lower panels of Figure 2 reveal how the {(xL,0),(xL,0); Accept}
equilibrium space changes in response to increases in
ā¬
Īµ . As J becomes less accurate,
Line 2a shifts downward: the
ā¬
Ī² threshold (
ā¬
Ī²*) for each value of p is lowered, and the
equilibrium space grows. At the same time, Line 2bāwhich, recall, summarizes at
the more permissive āshifts up closer to Line 2a, reflecting the fact that as
increases, the probabilities that J observes (at
ā¬
ĻJ2) and (at
ā¬
ĻJ3) will converge. In
words, a less accurate J has greater difficulty discerning good times from bad timesāand
vice-versa. Notably, as
ā¬
Īµ increases, the downward shift
ā¬
Ī²* is larger in āgood timesā (p >
0.5) than in ābad timesā (p < 0.5), revealing how Jās uncertainty about the state of the
economy grants I- greater scope to make a ālow-ball,ā rent accruing offer.
At lower values of
ā¬
Īµ (i.e. as J becomes more accurate; see Figure 3), J is
increasingly able to distinguish different states of the economy; in these cases, the
probabilities that J observes
ā¬
Ė Ļ H and
ā¬
Ė Ļ L diverge. As a result, Line 3a quickly loses
convexity,11 revealing a rising
ā¬
Ī²* at
ā¬
ĻJ2 and a shrinking equilibrium space. At the same
time, Line 3b flattens out, more starkly separating at from . In good times,
then, only a group with extremely favorable prior beliefs about the Founding Party will
accept a low offer.12 In bad times, the equilibrium conditions specified in Proposition 1
11 Indeed, Line 4a becomes concave as
ā¬
Īµ approaches 0. 12 Other groups will update their beliefs sufficiently toward I- such that the mediated value of f will be extremely low, causing rejection.
!
"*
!
"J3
!
"
!
Ė " H
!
Ė " L
!
"*
!
"J3
!
"J2
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Rosenberg Ch. 2
19
become much less probable.13
The third and final PSNE of the game (see Appendix for proof) is found at
{(xH,0),(0,0); Reject}. Hereāwith J playing Reject at and āI-ās best response
depends on the state of the economy. If , I- can avoid rejection by mimicking I+
and offering xH, in effect āmovingā J to (where, as mentioned above, J always plays
Accept). If , I- cannot buy its way out of rejection: the most it can offer is xL,
which J will surely reject. As a result, I- prefers to reveal its type and abscond with the
entire budget, āmovingā J to (where J, observing x = 0, always plays Reject). As
revealed by Proposition 2 below, the conditions for the {(xH,0),(0,0); Reject} PSNE are
simply the mirror images of those for {(xL,0),(xL,0); Accept}.
13 Because an increasingly accurate J is very likely to identify bad times as such, it is very unlikely that J will update its beliefs at
ā¬
ĻJ2 [(xL , Ė Ļ H )], doing so at
ā¬
ĻJ3 [(xL , Ė Ļ L )] instead. As a result, the equilibrium
area above Line 4a (the equilibrium conditions specified by Equations 3 and 5, i.e. at
ā¬
(xL , Ė Ļ H ) ) is unlikely to apply to J.
!
"J2
!
"J3
!
" = " H
!
"J1
!
" = " L
!
"J1
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Rosenberg Ch. 2
20
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Ī²
p
Figure 2 Nash Equilibria: Īµ = 0.25
PSNE: x-l, x-l; Accept
PSNE: x-h, x = 0; Reject
Line 2a
Line 2b
MSNE
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Ī²
p
Nash Equilibria: Īµ =.35
PSNE: x-l, x-l; Accept
PSNE: x-h, x = 0; Reject
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Ī²
p
Nash Equilibria: Īµ =.45
PSNE: x-l, x-l; Accept
PSNE: x-h, x = 0; Reject
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Rosenberg Ch. 2
21
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Ī²
p
Figure 3 Nash Equilibria: Īµ = 0.25
PSNE: x-l, x-l; Accept
PSNE: x-h, x = 0; Reject
Line 3a
Line 3b
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Ī²
p
Nash Equilibria: Īµ =.15
PSNE: x-l, x-l; Accept
PSNE: x-h, x = 0; Reject
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Ī²
p
Nash Equilibria: Īµ =.05
PSNE: x-l, x-l; Accept
PSNE: x-h, x = 0; Reject
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Rosenberg Ch. 2
22
Proposition 2: {(xH,0),(0,0); Reject} is a PSNE iff:
ā¬
xL +Ī²(1ā p)Īµ
(1ā Ī²)p(1āĪµ) + Ī²(1ā p)Īµ + (1ā Ī²)(1ā p)Īµā
ā ā
ā
ā ā f ā¤ Ī“f at
ā¬
ĻJ2; and (7)
ā¬
xL +Ī²(1ā p)(1āĪµ )
(1ā Ī²)pĪµ + Ī²(1ā p)(1āĪµ ) + (1ā Ī²)(1ā p)(1āĪµ)ā
ā ā
ā
ā ā f ā¤ Ī“f at
ā¬
ĻJ3. (8)
Re-arranging the equations to solve for the (upper) thresholds yields:
at
ā¬
ĻJ2 ; and (9)
ā¬
Ī²* ā¤
Ī“f ā xL
fpĪµ + (1ā p)(1āĪµ)[ ]
Ī“f ā xL
fpĪµ + (1ā p)(1āĪµ)
at
ā¬
ĻJ3. (10)
For the converse reasons from Proposition 1, Proposition 2 requires a relatively
low
ā¬
Ī²* to sustain the equilibrium (i.e. to sustain rejection at the low-offer information
sets
ā¬
Ļ J2 and
ā¬
ĻJ3). As above, we assume that
ā¬
Īµ < 1/2, ensuring that
ā¬
Ī²* at
ā¬
ĻJ3
ā¬
[(xL , Ė Ļ L )]
must be less than
ā¬
Ī²* at
ā¬
ĻJ2
ā¬
[(xL , Ė Ļ H )]: if J is going to reject I at the former, it will always
do so at the latter. Figure 2 graphs the {(xH,0),(0,0); Reject} equilibrium with
ā¬
Īµ = 0.25.
The area below Line 5b satisfies Equations 8 and 10, which (for reasons just specified)
must satisfy Equations 7 and 9 as well. As a result, this area summarizes the conditions
under which {(xH,0),(0,0); Reject} is a PSNE.
To help interpret these conditions, recall that in this equilibrium J will reject any
low offer (note the lower area of Figure 2). Predictably, the more likely it is that times are
good (i.e. the higher is p), the more likely it is than even a group with favorable priors
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Rosenberg Ch. 2
23
will reject xL, requiring I- to make a high offer to maintain its support.14 In bad times, the
relationship between p and
ā¬
Ī² flattens out substantially: only a group with decidedly
unfavorable priors about the party will reject a low offer. If it does, I- will abscond with
the budget.
Changes in
ā¬
Īµ affect the equilibrium conditions under which the {(xH,0),(0,0);
Reject} is sustained. As with the {(xL,0),(xL,0); Accept} equilibrium above, higher values
of
ā¬
Īµ (i.e. a less accurate J) force the probabilities that J observes and to converge
for every value of p. Returning to Figure 2, we now look to the space below Line 2b to
summarize the equilibrium space, which grows along with the range of
ā¬
Ī² below which J
will reject a low offer.
At the same time, we already know that higher values of
ā¬
Īµ also decrease the
range of
ā¬
Ī² above which J will accept a low offer, increasing the scope of the
{(xL,0),(xL,0); Accept} equilibrium. Whatās more, increases in
ā¬
Īµ actually increase the
applicability of the Accept PSNE more than that of the Reject PSNE at nearly every value
of p.15 In good times, then, Jās uncertainty about the state of the economy is more likely
to help I ālow-ballā J than it is to force to make J a high, state-reflecting offer. In bad
times, a less accurate J (ceteris paribus) is still more likely to accept a low offer than to
reject it and stop supporting the incumbent (unless, of course, is sufficiently low).16
Lower values of
ā¬
Īµ (i.e. a more accurate J) shrink the equilibrium space and pull
apart the ārejectā conditions at
ā¬
ĻJ2 and
ā¬
ĻJ3 (see Figure 3): the lower is
ā¬
Īµ , the better is J
at distinguishing bad times from good times, and vice-versa. In good times, the 14 As is clear in Figures 2 and 3, as p approaches 1 every group will reject Iās low offer in equilibrium. 15 This generalization breaks down as p approaches 1. 16 This accords with our restriction on : in bad times when resources are scarce, even an extremely inaccurate J is unlikely to believe the incumbentās budget is very bigāthere are simply fewer resources to observe.
!
"
!
Ė " H
!
Ė " L
!
"
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Rosenberg Ch. 2
24
equilibrium conditions specified in Proposition 2āwhereby J updates its beliefs at the
āwrongā
ā¬
ĻJ3[(xL , Ė Ļ L )]ābecome much less applicable as decreases.17 In bad times, as J
becomes increasingly certain of the state of the economy, Jās beliefs about I must be
increasingly unfavorable to sustain rejection of a low offer.
In good times, then, the theory does not allow for rejectionāgiven adequate
resources, a ārent-seekingā incumbent always prefer to give J a high offer (mimicking a
ātrueā incumbent and foregoing rents) rather than lose its support. While J might believe
the incumbent to be corrupt before observing such an offer, this belief is countered by the
high-offer signal, which J is sure to accept. In bad times, however, the rent-seeking
incumbent no longer has the resources to ābuyā acceptance in this way, and a citizen or
group with sufficiently unfavorable beliefs about the party will reject the party even if
given a state-reflecting offer. In other words, bad times force a rent-seeking incumbent to
āface the musicā of its failure to deliver to its constituents. Stepping briefly outside the
strict confines of the model, we can imagine the entirely realistic scenario whereby a
founding party which is able to maintain its coalition while collecting rents in āgood
timesā is suddenly unable to do either when times turns bad.
However it occurs, a founding party facing rejection abandons any claim to
support and legitimacy among J and opts to purse blatantly kleptocratic policies vis-Ć -vis
the group. Of course, the party may still be able to maintain power over J via coercion
and/or by incorporating other groups into its coalition. The model is currently silent on
these possibilities; below, we speculate on them in more detail.
17 Because an increasingly accurate J is very likely to identify good times as such, it is very unlikely that J will update its beliefs at
ā¬
ĻJ3 [(xL , Ė Ļ L )], doing so at
ā¬
ĻJ2 [(xL , Ė Ļ H )] instead. As a result, the equilibrium
area below Line 4b (the equilibrium conditions specified by Equations 3 and 5, i.e. at
ā¬
(xL , Ė Ļ L )) is unlikely to apply to J.
!
"
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Rosenberg Ch. 2
25
Before discussing any mixed strategy equilibria, an additional point warrants
mention. The above analysis has been conducted with āJās belief that the Opposition
is āgoodāāset at 0.3, a value that satisfies Assumption 4 but still implies an opposition
held in relative disregard by J. This parameterization is realistic for a Founding Party
system, particularly if the opposition is believed to represent the ancien regime
(Huntington 1968); in these cases, J is unlikely to vest much credibility in the
oppositionās promises of future benefits from its rule. Still, it is important to note that,
ceteris paribus, higher values of (i.e. a better-regarded opposition) would make
Proposition 1 (i.e. the Accept PSNE) more difficult to satisfy while making Proposition 2
((i.e. the Reject PSNE) easier to satisfy. As a result, a more credible opposition will
reduce a founding partyās scope for rent seeking in good times and make sustaining Jās
support more challenging in bad times.
Mixed Strategy Nash Equilibrium
Where our PSNE do not existānote the areas between the equilibrium spaces in
Figures 2 and 3āwe must look for mixed strategy Nash equilibria (MSNE). The game
features a unique (see Appendix for proof) MSNE at
ā¬
Ź¹ā² Āµ (xL ,m), (1ā Ź¹ā² Āµ )(x H ,0), (xL ,0); Ī³ (Accept), (1ā Ī³ )(Reject), Accept{ }. In words, this
equilibrium requires I- to mix between its action (xL,m) and (xH,0) if
ā¬
Ļ = Ļ H (with
probabilities
ā¬
Ź¹ā² Āµ and
ā¬
1ā Ź¹ā² Āµ , respectively) and to play the pure strategy (xL,0) if
ā¬
Ļ = Ļ L . At
the same time, J mixes between its actions Accept and Reject at
ā¬
ĻJ2 (with probabilities
ā¬
Ī³
and
ā¬
1āĪ³ , respectively) and plays the pure strategy Accept at
ā¬
ĻJ3 (with probability
ā¬
Ī» =
1). As above, I+ always makes state-reflecting offers; J always accepts xH and rejects x =
!
"
!
"
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Rosenberg Ch. 2
26
0; and ā¤ Ā½.
To construct this equilibrium, we assume an m/k ratioāthe cost-to-effect ratio of
propagandaāthat is small enough to ensure that (xL,m) strictly dominates (xL,0) at
ā¬
Ļ H
(we label this assumption A5; see Appendix for proof).18 In words, we assume
propaganda is sufficiently effective at influencing Jās ability to observe the state of the
economy that I- will bear its costs when Jās acceptance of a low offer is uncertain. At
ā¬
Ļ L ,
(xL,0) strictly dominates (xL,m), and I- does not invest in propaganda: constrained to
making a low offer, the incumbent has no incentive to increase the probability that J
observes a high growth economy when times are in fact bad.19 Because (xL,0) also strictly
dominates (0,0) in the mixed strategy parameter space, J plays the former with probability
1 (see Appendix for proofs).
Amending Equations 1 and 3 to find the conditions under which I- and J play
mixed strategies,20 we characterize the equilibrium as follows:
Proposition 3:
ā¬
Ź¹ā² Āµ (xL ,m), (1ā Ź¹ā² Āµ )(x H ,0), (xL ,0); Ī³Accept, (1ā Ī³ )Reject, Accept{ } is a MSNE if < Ā½ and:
; and (11)
ā¬
Ī³ =
Ļ +mĻ + r
ā Ī»(Īµ + k)
1ā (Īµ + k), where
ā¬
Ī» =1. (12)
18 Given A3, we already know that (xH,0) strictly dominates (0,0) at
ā¬
Ļ H . 19 Somewhat counter-intuitively, then, the incumbent employs economic propaganda only to downplay the state of the economy and never to inflate the state of the economy. This conclusion is interesting in its own right and deserves further analysis. 20 I.e., the conditions under which I- is indifferent between (xL,m) and (xH,0) at
ā¬
Ļ H and J is indifferent between Accept and Reject at
ā¬
ĻJ2.
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Rosenberg Ch. 2
27
To interpret this equilibrium, we conduct comparative statics on Equations 11.21 Note that
analyses apply when
ā¬
Ļ = Ļ H (i.e. in āgood times,ā when I- is playing mixed strategies).
Ceteris paribus:
1.
ā¬
āĀµ /āĪ² > 0
The more favorable a group's prior beliefs about the incumbent's type, the more likely is
the incumbent to invest in propaganda and make a low offer to that group. By contrast, a
group with less favorable prior beliefs is more likely to receive the state-reflecting offer
xH.
2.
ā¬
āĀµ /āĪµ > 0:
The less accurate a group, the more likely it is to be targeted with propaganda and a low
offer by the incumbent. As J becomes more accurate, the incumbent is more likely to
make a high offer instead.
3.
ā¬
āĀµ /āk > 0 :
As the effectiveness of propaganda increases, the incumbent is more likely to invest in it
(and make a low offer).
4.
ā¬
āĀµ /āĪ“ < 0 : The more favorable a groupās beliefs about the opposition, the less likely is the
incumbent to "low-ball" the group with a low offer and propaganda, and the more likely
the group will receive a high offer instead. The less favorable a groupās beliefs about the
opposition, the more likely it will be targeted with a low offer and propaganda.
21 Conducting the only relevant comparative static on Equation 12 (
ā¬
āĪ³ /āĪµ < 0) produces non-sensible results that are artifacts of the two state set-up of the model. Specifically, the results imply that, as J becomes a more accurate observer of the state of the economy, the group will be more likely to accept xL at
ā¬
ĻJ2 [(xL , Ė Ļ H )]. This does not make sense is either good or bad times: a more accurate group would never
be more likely to accept a low offer at
ā¬
ĻJ2
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Rosenberg Ch. 2
28
To better understand this MSNE, it is useful to consider all the equilibria in toto22
and to recall that increases in
ā¬
Īµ force the probabilities that J observes
ā¬
Ė Ļ H and
ā¬
Ė Ļ L to
converge. As a result, the gap between
ā¬
Ī²* for the Accept PSNE (determined at
ā¬
ĻJ2 ) and
ā¬
Ī²* for the Reject PSNE (determined at
ā¬
ĻJ3 ) is reduced, and the mixed strategy
equilibrium space is shrunk (see Figure 3). At the same time, we know that increases in
ā¬
Īµ
increase the likelihood that I- will target J with propaganda and a low offer in that space.
In other wordsāand in good timesā higher values of
ā¬
Īµ increase the probability the
(reduced) mixed strategy equilibrium space will be āfilledā with propaganda and low
offers.
In this vein, it is helpful to think of Iās investment in propaganda as a way to
āpushā J toward the Accept equilibriumāwhere the group will accept a low offerāand
away from the Reject equilibriumāwhere the group will rejects that offer and receives a
high offer instead. Because the distance between these two equilbria is small, the
propaganda is more likely to be effective. Put more concretely, propaganda simply
increases the probability that J observes Iās low offer at
ā¬
ĻJ2 rather than
ā¬
ĻJ3 āthe larger
is k, the higher that probability. In this way, propaganda is a tool employed by the
Founding Party to justify a low offer in good times. This conception is simply the formal
expression of the intuition spelled out above: in order to maintain its ābenefit of the
doubtā while low-balling J, the Founding Party has a clear incentive to invest in ādoubt.ā
Lower values of
ā¬
Īµ force the probabilities that J observes
ā¬
Ė Ļ H and
ā¬
Ė Ļ L to diverge,
expanding the āspaceā between the pure strategy and the mixed strategy equilibria. In
22 To help do so, return briefly to Figures 2 and 3, and recall that: a) the areas above Line 2a and 3a summarize the conditions (for
ā¬
p,Ī², and Īµ ) under which the Accept PSNE is satisfied; b) the areas below Lines 2b and 3b summarize the conditions under which the Reject PSNE is satisfied; and c) the MSNE applies to the areas in between the lines (where no PSNE apply).
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Rosenberg Ch. 2
29
addition, we know that an increasing
ā¬
Īµ reduces the probability that I- will invest in
propaganda and increases the probability that it will make a high offer instead. In light of
the discussion above, this makes a lot of sense: if J is a more accurate observer of the
economy, propaganda is less likely to āpushā J toward accepting a low offer, making it
less likely to be a worthwhile investment.
Independent of
ā¬
Īµ , it is clear that the more effective the Founding Partyās
propaganda (i.e. the higher is k given m), the more likely that the party will invest in it.
Thus, should the party possess a technology that greatly obscures Jās ability to observe
the state of the economy (i.e. one that drives k toward its upper-bound of Ā½), it may be
targeted even at otherwise accurate groups. Put another way, k represents the size of the
āpushā made possible by propaganda. The larger the potential push, the more likely it
will be worthwhile for the Founding Party to shove.
Using this framework to interpret how variation in
ā¬
Ī² effects a Founding Partyās
strategy is rather straightforward. Looking at the mixed equilibrium spaces in Figures 2-
3, it is clear that the larger is
ā¬
Ī², the more likely J will be located ānearā Line 2a/3a and
the Accept PSNE. Thus, the more likely it is that J can be āpushedā into accepting a low
offer in good times by the incumbentās propaganda. Of course, the reverse is true for
variation in
ā¬
Ī“ .
Observable Implications
The first observable implications of the theory stem from our definitions of
ā¬
Ī² and Īµ :
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Rosenberg Ch. 2
30
1. Citizens with more favorable beliefs about the Founding Party are more likely to
believe that the party will ultimately deliver on its material promises than citizens
with less favorable beliefs.
2. Citizens in low-information environments are less accurate observers of the state of
the economyāand thus the size of the incumbentās budgetāthan citizens in high-
information environments.
a. Citizens in lower-information environments are less likely to observe
incumbent rent seeking than citizens in higher-information environments.
To help lay out further implications, we consolidate the equilibrium analyses discussed
above in Figures 4 and 5. In essence, the figures summarize āwho gets whatā and how the
party maintains dominance among different types of groups. In general, note that, ceteris
paribus:
3. The Founding Party maintains the support of citizens in low-information
environments by providing them with fewer goods and services than citizens in high-
information environments.
a. This discrepancy is more pronounced in āgood timesāāwhen the government
enjoys a larger budgetāthan in ābad times.ā
In āgood times,ā ceteris paribus:
4. The Founding Party maintains the support of citizens with more favorable beliefs by
providing them with fewer goods and services than citizens with less favorable
beliefs.
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Rosenberg Ch. 2
31
Figure 4:
ā¬
Ļ = Ļ H
5. Low-information groups with highly favorable beliefs (i.e. ācoreā voters) are the
ācheapestā backers of the Founding Party: they are most likely to accept a minimal
amount of goods and services from the government, even without the party investing
in propaganda. In short, they are the most likely to give the party āthe benefit of the
doubt.ā
a. The more low-information, ācoreā voters a Founding Party counts among its
supporters, the more rents it can accrue while maintaining popular support (ala
Bates 1981).
6. High-information groups with relatively unfavorable beliefs (i.e. āswingā voters) are
the most costly backers of the Founding Party: they require a large amount of goods
0
1
1
Benefit of the Doubt
Increase Doubt via Propaganda
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Rosenberg Ch. 2
32
and services from the government to maintain their support. They are least likely to
give the party the ābenefit of the doubt.ā
a. The more high-information, āswingā voters a Founding Party counts among
its supporters, the fewer rents it can accrue while maintaining popular support.
7. Ceteris paribus, the Founding Party will be more likely to target propaganda (i.e.
increase ādoubtā) at citizens in lower-information environments than at citizens in
higher-information environments.
a. Citizens with middling access to information (i.e. peri-urbanites or more
educated ruralites) are most likely to be targeted.
8. Citizens with middling access to information and mid-range beliefs about the
Founding Party are the most likely citizens to be targeted with propaganda.
a. Propaganda is more likely to be targeted at high-information citizens if they
are also very partisan supporters of the incumbent.
b. Among low-information citizens, propaganda will be targeted at those with
middle-to-low beliefs about the Founding Party.
9. Citizens with more favorable beliefs about the opposition will:
a. Require more goods and services to continue supporting to the incumbent; and
b. Are less likely to be targeted with propaganda.
In ābad times:ā
10. If citizensā beliefs are relatively favorable, the Founding Party maintains popular
support despite the governmentās provision of few good and services to its citizens.
a. In this case, the Founding Party accrues fewer rents than in āgood times.ā
11. If citizensā beliefs are unfavorable, they will reject the Founding Party.
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Rosenberg Ch. 2
33
a. In this case, the Founding Party becomes completely rent seeking vis-Ć -vis
these citizens
12. Citizens with more favorable beliefs about the opposition will be more likely to reject
the incumbent.
Figure 5:
ā¬
Ļ = Ļ L
Compelling Extensions/Speculations
To conclude this chapter, we will speculate on two particularly compelling
extensions of the theory. First, we will consider how the theory might incorporate a more
traditional approach to political propaganda, whereby the incumbent emphasizes its
historical role and founding credentials (and denigrates the credentials of its opposition).
Second, we will consider how a Founding Party may sustain power if a majority of
citizensā best responses are to reject it.
A More Traditional Approach to Propaganda
0
1
(0,0); Reject
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Rosenberg Ch. 2
34
Above, the incumbent uses propaganda to manipulate a groupās ability to observe
the state of the economy and justify a low offer in good times. As such, propaganda is
used to affect how citizens update their beliefs about the incumbent. If propaganda is
effective, the Founding Party is better able to low-ball citizens (and accrue rents) while
maintaining their beliefs that the party is āTrueā to its founding role and reputation, and
will thus ultimately deliver on its material promises.
To the same end, what if the incumbent used propaganda to manipulate these
beliefs directly, ābeforeā a citizen updates those beliefs? While theoretically less
interesting,23 this possibility accords with a significant literature on political propaganda
in Founding Party systems (CITES). Many of these works focus on an incumbentās
efforts to emphasize its history, reminding citizens both of its role in the āstruggleā and of
its delivery of independence or majority rule. In terms of the model, I attempts to buffer
its status as a āTrueā Founding Party independent of its offer to J or of the state of the
economy.
Using the modelās theoretical framework, we can represent this type of
propaganda as an added value (l) to Jās prior belief
ā¬
Ī², or
ā¬
Ī²+l. We can then ask: how
might this ātype lā propaganda affect the equilibria of the game? Because Jās prior
beliefs, manipulated or not, will always be updated via Jās observation of x and
ā¬
Ė Ļ , it
makes a lot of sense to investigate l within the confines of the existing model. And while
we cannot explicitly ask or answer under which conditions I- will invest in l,24 we can
23 As will be described below, employing this type of propaganda is less strategic and more a political āgivenā than manipulating citizensā ability to the state of the economy. 24 To do so, we would need to include such an investment among Iās available actions and strategies, which would in fact require the construction of an separate (and significantly more complex) model.
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Rosenberg Ch. 2
35
strongly speculate on the question by noting the effects of an additive shift in
ā¬
Ī² on the
equilibrium outcomes described above.
Indeed, we already know the effects of an increased
ā¬
Ī² in the mixed strategy
equilibrium space: the probability that I- will combine a low offer with (type k)
propaganda in good times increases, while the probability that I- makes a high, state-
reflecting offer decreases. Moreover, recalling Propositions 1 and 2, the effects on our
pure strategy equilibria are extremely straightforward.
ā¬
Ī²+l would make Proposition 1
easier to satisfyāexpanding the applicability of {(xL,0),(xL,0); Accept}āand make
Proposition 2 more difficult to satisfyāreducing the applicability of {(xH,0),(0,0);
Reject}. All these effects are clearly to the benefit of the incumbent, allowing it to more
easily accrue rents in good times and maintain support with a state-reflecting offer in bad
times. Thus, one might conclude thatāso long as it was not prohibitively expensive to do
soāa ārent-seekingā Founding Party would always employ this kind of propaganda.
Figures 2 and 3ādepicting, once again, all the equilibria at different level of
ā¬
Īµā
reveal a more nuanced picture. To begin with, let us assume that l, like k, cannot be too
large;25 in other words, type l propaganda cannot starkly increase a groupās prior beliefs
about the Founding Party. Rather, it can only buffer these beliefs at the margin.
Given a citizen group that already satisfies Proposition 1, propaganda is
unnecessary: the group will accept a low offer without it. However, if a groupās
characteristics (
ā¬
Ī² and
ā¬
Īµ ) and the state of the world (p) leave the group short of this
thresholdāas defined by Equation 5ātype l propaganda might become an attractive
option for the incumbent, enabling it to induce acceptance. In effect, the propaganda
25 Of course,
ā¬
Ī²+l must be upper-bounded by 1.
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Rosenberg Ch. 2
36
would simply shift Lines 2a and 3a down by l. In good times, this shift would expand I-ās
scope for rent seeking;26 in bad times; it would help ensure acceptance.
A similar analysis can be applied to Proposition 2. Given our assumption that l
cannot be very large, a group firmly planted at the lower reaches of the
ā¬
Ī² range will
always reject a low offer, making type l propaganda useless. However, if a ārejectingā J
falls close to the threshold defined by Equation 10, type l propaganda could āmoveā J out
of the Reject PSNE space, in effect shifting Lines 3a and 3b down by l. In this case, the
incumbentās use of propaganda would save it from rejection in bad times and give it a
shot at rent seeking27 in good times.
As revealed by Figure 3, the incumbentās use of type l propaganda is an
especially compelling possibility at higher values of
ā¬
Īµ , whereby J is increasingly
uncertain about the state of the economy. In these cases, the addition of l to
ā¬
Ī²+ l could
actually āmoveā a group satisfying the Reject PSNE to satisfying the Accept PSNEā
particularly in bad times.28 Graphically, Line 2a could shift down to include a group
previously included below Line 2b (which would also shift down given
ā¬
Ī²+ l). Thus, an
incumbent that employed type l would ensure acceptance in bad times. In good times, the
incumbent could at the very least increase its potential for rent seeking. And, if
ā¬
Īµ was
very high, it could very well ensure it.
Crackdown and Coercion: Extending the āRejectā Equilibrium
26 In this way, type l propaganda provides J with an even more explicit āpushā into the Accept equilibrium space than type k propaganda. Because our discussion of type l propaganda is so primitive, it is not worth speculating about whether, in the cases specified above, the incumbent would prefer to invest in type k propaganda, type l propaganda, or both. 27 J would be āmovedā to the MSNE space. 28 In good times, this āswitchā is only possible as
ā¬
Īµ approaches its (still restricted) limit at 0.5.
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Rosenberg Ch. 2
37
As mentioned briefly above, our theory depicts the founding partyās challenge as
maintaining power in the context of a relatively competitive political system, whereby
opposition parties exist and compete (albeit at a distinct disadvantage) for citizensā votes.
As such, when J ārejectsā the founding party and removes itself from the partyās coalition,
J opts to support some opposition force O, represented by the alternative flow payoff
ā¬
Ī“f .
In the interest of parsimony, our theory excludes many of the factorsāthe probability
that O could actually take power; the size of J versus other groups in the founding partyās
coalitionāthat should ideally be included in modeling the causes and consequences of
this decision. Nevertheless, here we briefly speculate on the outcome and its implications
for founding party dominance.
To that end, let us assume that J is a sufficiently large group that its support is
integral to the founding partyās dominant position but not so large as to threaten the
incumbentās ability to win elections. In this case, the party has two primary spending
options: it can absorb as rents the portion of its budget previously allocated to J (as the
model specifies, per Magaloniās āpunishment regimeā), or it can use those resources to
try bring another group into its coalition to compensate for the loss of J. The party may
also try to prevent J from defecting to the opposition by investing in tools of physical
coercion, using them crackdown on both J and the partyās newly empowered opposition.
Given the significant costs of a coercive apparatus (CITES), we can expect a rent
seeking partyāconcerned primarily with maintaining power to ensure its access to state
resourcesāto pursue coercion only if J is large enough to threaten its electoral success.
[Of course, if other groups have also defected (or are likely to defect) from the founding
partyās coalition, the likelihood of this scenario increases.] In this case, the incumbent
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Rosenberg Ch. 2
38
may crackdown on the opposition and its supporters while maintaining the faƧade of
political competition (see: Zimbabwe), or it can attempt to eliminate all challengers and
effect a one-party state (myriad examples). We discuss these outcomes in much greater
detail in Chapter 7, considering the possibility that a dominant incumbentās investment in
propaganda and restrictions on alternate information sources may be a leading indicator
of a crackdown on political opposition and the advent of authoritarian politics in
previously open founding party systems.
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Rosenberg Ch. 2
39
APPENDIX Proof 1:{(xL,0),(xL,0); Accept}, {(xH,0),(0,0); Reject}, and {(xH,0); Accept} (if and I = I+) are the only PSNE of the game. If J is playing Accept (i.e. accepting xL for sure), I-`s best response is to always play (xL,0). If acceptance is ensured, J has no incentive to ever invest in k, to offer xH, or to abscond (which ensures rejection). If J is playing Reject, (i.e. rejecting xL for sure), A3 tells us that I-`s best response is to always avoid rejection by offering xH whenever feasible (i.e. in āgoodā times); investing in m does nothing to avoid rejection in this case. If xH is not feasible (i.e. in ābadā times), I-`s best response is to abscond; investing in k does nothing to prevent rejection. Proof 2:
ā¬
Ź¹ā² Āµ (xL ,m), (1ā Ź¹ā² Āµ )(x H ,0), (xL ,0); Ī³ (Accept), (1ā Ī³ )(Re ject), Accept{ } is a unique MSNE. 2a. Given A3, I-`s action
ā¬
(x H ,0) strictly dominantes (0,0) if . In addition,
ā¬
(xL ,m) strictly dominantes (xL ,0) so long as:29
ā¬
((1ā (Īµ + k))Ī³ (r + Ļ) + (Īµ + k)Ī»(r + Ļ) > (1āĪµ )Ī³ (r + Ļ) +ĪµĪ»(r + Ļ)k(Ī» ā Ī³ )(r + Ļ) > m
k >m
(Ī» ā Ī³ )(r + Ļ)
By contrast,
ā¬
(xL ,m) cannot dominante (xL ,0) when
ā¬
Ļ = Ļ L because:30
ā¬
(Īµ + k)(Ī³Ļ ām) + (1ā (Īµ + k))(Ī»Ļ ām) > ĪµĪ³Ļ + (1āĪµ)Ī»Ļk(Ī³ ā Ī»)Ļ > m
k >m
(Ī³ ā Ī»)Ļ is non - sensical
For a similar reason we know that I cannot be indifferent between
ā¬
(xL ,0) and (0,0) when
ā¬
Ļ = Ļ L :31
29 Because k must be positive this condition is sensible.
ā¬
Ī» - the probability that J accepts a low offer at
ā¬
ĻJ3(xL , Ė Ļ L )should always be larger than
ā¬
Ī³ - the probability that J accepts a low offer at
ā¬
ĻJ2(xL , Ė Ļ H )
30 The condition is nonsensical because
ā¬
Ī³ - the probability that J accepts a low offer at
ā¬
ĻJ2(xL , Ė Ļ H ) -
cannot be higher than
ā¬
Ī» - the probability that J accepts a low offer at
ā¬
ĻJ3(xL , Ė Ļ L ) .
31 Again,
ā¬
Ī³ cannot be higher than
ā¬
Ī» .
!
" = " H
!
" = " H
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Rosenberg Ch. 2
40
ā¬
Ļ[Ī³Īµ ā (Ī»(1āĪµ ))] = Ļ L
Ī» ā Ī³Īµ ā Ļ
L
Ļ1āĪµ
2b. If J is indifferent between Accept and Reject at
ā¬
Ļ J2(xL , Ė Ļ H ), J will play Accept for certain
at
ā¬
ĻJ3(xL , Ė Ļ L ):
Jās indifference condition at
ā¬
ĻJ2 is:
ā¬
xL +Ī²(1ā p)Īµ
Ī²(1ā p)(1āĪµ) + (1ā Ī²)pĀµ(1ā (Īµ + k)) + (1ā Ī²)(1ā p)Īµā
ā ā
ā
ā ā f = Ī“f
Jās indifference condition at
ā¬
ĻJ3 is:
ā¬
xL +Ī²(1ā p)(1āĪµ)
Ī²(1ā p)(1āĪµ) + (1ā Ī²)pĀµ(Īµ + k) + (1ā Ī²)(1ā p)(1āĪµ )ā
ā ā
ā
ā ā f = Ī“f
Given that
ā¬
Īµ ā¤12
, we know that if J is indifferent at
ā¬
ĻJ2 the indifference condition at
ā¬
ĻJ3
cannot hold. More specifically, we know the LHS will be greater than
ā¬
Ī“f , such that J will always accept
ā¬
xL at
ā¬
ĻJ3.
By the same token, we know that if J is indifferent at
ā¬
ĻJ3(xL , Ė Ļ L ), J will always reject
ā¬
xL
(i.e. play Reject for certain) at
ā¬
ĻJ2(xL , Ė Ļ H ). This possibility, however, is nonsensical: if
ā¬
Ī³
(the probability that J accepts xL at
ā¬
ĻJ2) equals 0, then Iās best response function when
ā¬
Ļ = Ļ H requires that
ā¬
Ī» (the probability that J accepts xL at
ā¬
ĻJ3) is greater than 1:
Per Equation 12:
ā¬
Ī³ =
Ļ +mĻ + r
ā Ī»(Īµ + k)
1ā (Īµ + k)āĪ» =
Ļ +mĻ + r
āĪ³
(Īµ + k)+Ī³
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Rosenberg Ch. 2
41
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Rosenberg Ch. 2
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