On the benefits of party competition

We study the role of parties in a citizen-candidate repeated-elections model in which voters have incomplete information. We first identify a novel “party competition effect” in a setting with two opposing parties. Compared with “at large” selection of candidates, party selection makes office-holders more willing to avoid extreme ideological stands, and this benefits voters of all ideologies. We then allow for additional parties. With strategic voting, citizens benefit most when the only two parties receiving votes are more moderate. With sincere voting, even with three parties, extreme parties can thrive at the expense of a middle party; and whether most citizens prefer two or three parties varies with model parameters. JEL classification: C72, C73, D72, D78. ∗We thank the audiences of seminars at the Wallis Institute, Rochester University, at Southampton University, of the 2004 Workshop in Political Economy at Stony Brook, the 2004 Political Economy Workshop at Vienna, the 2005 Society for Advancement of Economic Theory Conference in Vigo, and especially Jim Snyder, for their comments. Nate Anthony helped significantly in this research.