Three essays in political economy
OA Version
Citation
Abstract
This dissertation uses game theoretical models to study incentive and information designs in political systems. The first two chapters present theoretical models of strategic competition in election models, where candidates and biased media outlets act strategically to achieve optimal electoral outcomes. The third chapter uses a bargaining model to study the effectiveness of asymmetric-punishment legal systems in preventing petty corruption.
In Chapter One I present a model where biased media outlets attempt to convince a continuum of voters with heterogeneous priors to vote for their preferred policies. I show that a policy-driven monopolist’s optimal strategy responds strongly to the level of polarization within the electorate. Specifically, when the electorate is relatively moderate, the monopolist regularly conceals unfavorable news, whereas when the electorate is polarized, the monopolist might in fact hide favorable news. In a duopoly, purely policy-driven media outlets would either be completely truthful or utterly
uninformative based on their prior assessment of the situation. Profit-driven media outlets may be more useful than policy-driven ones as the former are shown to produce informative news even when they are pessimistic. I also show that polarization of the electorate decreases the informativeness of news in a duopoly market.
The second chapter presents a behavioral model where political candidates have immutable ideological stances and compete in a policy dimension. Voters belong to different groups with distinct preferences for policy levels, and candidates are differentiated by their abilities to setting the agenda with respect to varying levels of the policy. I show that in this environment candidates generally choose to run on divergent policy platforms, defying the convention of median-converging politicians in standard probabilistic voting models.
The third chapter deals with the debated usefulness of dishing out asymmetric punishment to both parties in corruption cases, especially when the bribed officials
are known to extort ordinary citizens. I find that while asymmetric punishment can be useful for increasing detection rate of petty corruption, it must be administered with care, as application to unsuitable situations will increase official’s incentives to engage in bribery.