A Drawback of Electoral Competition

In most major democracies there are very few parties compared to the number of possible policy positions held by voters. We provide an e¢ ciency rationale for why it might be appropriate to limit the proliferation of parties. In our model, the larger the number of parties, the greater the ine¢ ciency of Acknowledgments: We would like to thank two anonymous referees and Xavier Vives for helpful comments. We gratefully acknowledge …nancial support from the NSF under grants SBR 9911496 and 9905564, respectively. We are grateful to Johannes Horner, Antonio Merlo, Roger Myerson, Wolfgang Pesendorfer, Michele Piccione, Chun Seng Yip, and especially Herve Roche. yDepartment of Economics, 269 Mercer Street, New York, NY 10003. Web: http://www.econ.nyu.edu/user/lizzeria zDepartment of Economics, 3718 Locust Walk, Philadelphia PA 19104-6297. Web: http://www.ssc.upenn.edu/~persico/. xE-mail addresses: Lizzeri , Persico .