Chapter 2: A Theory of Founding Party Dominance

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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 “founding

parties” 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 model’s equilibria, we discuss its observable implications for Founding Party

systems. Finally, we present a few of the theory’s more compelling extensions.

Theory in Context

As summarized in Chapter 1, our theory of founding party dominance explores

how citizens’ beliefs about the party and their access to information impact the party’s

allocation of state resources and propaganda among voters in its coalition. More

specifically, we identify a so-called “benefit of the doubt” enjoyed by successful founding

parties. Driven by a party’s status as “founder” 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 voters’ 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 maintaining—and

manipulating—citizens’ beliefs about the party are critical to founding party dominance.

Historical Roles and Reputations

The idea that a political party’s 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 “a dominant party is dominant because people believe it is so…The party

is associated with an epoch.” (308). Analyzing a dominant party’s ability to fuse voters’

identification with the party with that of the state, Arian and Barnes (1974) assert that “it

may be virtually necessary for a party to preside over the establishment of a polity” (594).

In his landmark study Political Order in Changing Societies (1968), Samuel

Huntington argues that “the stability of the one-party [and dominant party] system

derives more from its origins than its character” (424, 429), and that “the strength of the

party derives from its struggle for power.” (426).1 According to Huntington, nationalist

and/or revolutionary (i.e. “founding) party strength doesn’t 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 “struggle,” 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 “politics of

aspiration” (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 party’s 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.

Huntington’s arguments about the relationship between a founding party’s

reputation and its political fortunes2 are echoed in analyses of single-party and dominant-

party regimes in sub-Saharan Africa’s 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 “struggle for power;” (2) their first mover

advantage in mobilizing previously un-politicized populations; (3) their ability to

maintain resulting “broad church” coalitions; and (4) the credibility of their promises of

(re-)distribution and economic development. Though tied less directly to a party’s

reputation, Collier (1982) demonstrates how “independence regimes” (100) in tropical

Africa that established themselves by way of elections—in other words, by mobilizing

voters—were 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 “founding party” [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, “Authoritarian Politics in Modern Societies.”

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time, most of these works—pointing to the lack of clear mechanisms between a party’s

historical credentials and its longer-term success3—highlight other factors in explaining

the maintenance of such dominance. In addition to the ‘social cleavage’-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)—particularly centrism and adaptability—and 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 literature’s 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 parties’ status as ‘founding’ or ‘liberation’ 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 “unlikely that the mechanisms that produce dominant rule [‘incumbents’ initial legitimacy as harbingers of national transformation’] also reproduce it over time.” As evidence, scholars cite dominant parties’ general pragmatism and their relatively rapid abandonment of ‘founding ideologies’ 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 party’s centrism and its related

ability to keep opposition parties on the margins of the political arena. Riker’s (1976)

landmark analysis of the Indian Congress Party cites party elites’ 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 “flexible boundaries” to

capture and remain in the political center, keeping opposition parties on the periphery of

the issue space. Pempel’s (1990) wide-ranging study of dominant-party democracies

similarly emphasizes the benefits of ideological flexibility and cultivating broad-based

support. According to Pempel, a “dominant 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 base” (pg. 12).

How do dominant parties defend these centrist, flexible positions over time? The

most recent approach to dominant party systems focuses on the party’s exploitation of

state resources. The fusion of party and state in a dominant party system, and the party’s

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 Greene’s (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 “create a large public sector and politicize the public

bureaucracy” (27) to sustain this “dominant party equilibrium.” When the state shrinks,

so goes dominance.

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Beatriz Magaloni’s (2006) study of “hegemonic-party survival”—which, like

Greene’s, is also based on Mexico’s PRI—also highlights the central role of a dominant

party’s 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 growth—as opposed to the size of the state—as the ultimate foundation

of patronage-based dominance. If times are good, Magaloni argues, most voters will not

risk access to an incumbent’s patronage in order to support an unknown challenger. If

times are bad, defection is less risky, and the dominant party’s patronage-based

‘punishment regime’—whereby disloyal localities are deprived of spoils—is 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 dimension—a founding party’s historical

reputation and the beliefs they inspire among the citizenry—into 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 party’s

strategic allocation of state resources is driven by citizens’ beliefs about the party, beliefs

based first and foremost on the party’s historical credentials. Because citizens update

their beliefs over time, we further argue that variation in citizens’ access to information—

and thus their abilities to update accurately—impacts not only the allocation of resources,

but also the party’s 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 ‘bottom-up’)

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 “offer,” 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

€

π ) is revealed

by Nature. In the interest of parsimony, there are two possible states: a high growth state

(

€

π H , or "good” times), and a low growth state ( , or “bad” times),

€

π ∈ π H ,π 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

€

ε and observes the correct state with probability

€

1−ε . In

effect,

€

ε captures J's information environment: the lower

€

ε , 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,

€

ε 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

€

ˆ π . From

above, we know that J observes

€

ˆ π H with probability

€

p × (1−ε) or

€

(1− p) × ε . Similarly,

J observes

€

ˆ π L with probability

€

(1− p) × (1−ε) or

€

p × ε .

As described above, the model assumes that citizens hold beliefs about the

Founding Party. Inspired by the party’s founding role—or, more concretely, its delivery

of some regime-level political good like independence or majority rule—these beliefs

represent a citizen’s 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-Seeking’ (I-), I ∈ (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 J’s beliefs as beliefs about I’s type and

denote them with

€

β. At the beginning of the game,

€

β captures J’s prior belief that the

Founding Party is of type I+. Conversely,

€

1− β represents J’s prior belief that the party is

of type I-.

J’s beliefs are dynamic; in other words, J can update its beliefs about I’s 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,

€

ˆ π .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

€

ʹ′ β and

€

1− ʹ′ β , respectively.

We model J’s payoff to supporting the Founding Party as , where the flow

payoff f represents J's future benefits from being governed by an ‘True’ 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 Huntington’s “politics of

aspirations” (1968) into the model. Straightforwardly, the value of f is mediated by J’s

(posterior) beliefs about the party’s 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

€

β'= 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

€

β' f summarizes the value of J’s 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 I’s type—and thus the value to J of I’s

future promises. Moreover, because J observes the state of the economy (and, by A1

below, the size of I’s budget) with varying degrees of uncertainty (i.e

€

ε ), 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 “benefit of the doubt,” whereby J

accepts a ‘low’ offer in the present while maintaining its expectations of a larger payoff

6These pieces of information are related, as x can be interpreted as I’s signal to J about

€

π .

!

x + " # f

!

" # =1

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in the future. Such acceptance is based in J’s belief that I’s offer is the best it can do

given the government’s economic constraints. More simply, it is based on J’s beliefs

about the type of founding party it is facing. For example, if J receives a ‘low’ 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 ‘True’) and toward

believing that I is willfully failing to deliver (i.e. that I is ‘Rent-Seeking’), thus reducing

any “benefit of the doubt.”

Given this context, we posit that I may very well have an incentive to increase the

noise around its offer x—and thus influence the ability of J to update its beliefs—by

manipulating J’s 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 receives—in addition to any rents—the flow payoff

€

ρ , 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:

€

UI = (B − x −m) + ρ , (1)

where B represents the government’s budget and is roughly equal to

€

π . 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:

€

(ε + k) ~ [0,1].

!

"

!

(" + k)

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propaganda, (B - x - m) always equals 0 and I+ maximizes only

€

ρ .

Out of office and without access to state resources—including (most of) the levers

of propaganda8—the Opposition (O) can only compete with the incumbent in the realm

of f, J’s 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

€

δ 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-

€

δ captures J's belief

that O is a 'bad' type, i.e. that it is corrupt—or simply planning to govern in the interest of

another group. Like

€

β,

€

δ ~[0,1], and J's expected payoff (by way of future benefits) from

rejecting the Founding Party and supporting O is summarized by

€

δ f.

We can now express J’s utility functions as follows:

€

UJ =x + ʹ′ β f if J 'Accepts' I's offer (and votes for the Founding Party) δf if J 'Rejects' I's offer (and votes for the Opposition)⎧ ⎨ ⎩

(2)

Thus, J re-elects the Founding Party Incumbent if

€

x + ʹ′ β f ≥δf . 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,

€

π H and π L : sI = [aI (πH );aI (π

L )]. If

€

π = π 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 media—such as the print media sector in post-apartheid South Africa—O could also invest in propaganda to counter I’s efforts (i.e. counter-propaganda). In the interest of simplicity, we could model such counter-propaganda implicitly in two ways: first, via

€

ε , and second, via the parameter k, which captures the effectiveness of I’s propaganda (described in greater below). O’s 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 I’s manipulations. In any case,

€

(ε + 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:

€

aI (πH )∈ (x H ,m);(x H ,0);(xL ,m);(xL ,0);(0,0)[ ] . If

€

π = π 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:

€

aI (πL )∈ (xL ,m);(xL ,0);(0,0)[ ] .

A strategy profile for J specifies one of two actions—Accept or Reject—at each

of J's information sets:

€

aJ (σJ )∈ (Accept, Reject). Denoted

€

σJ , these sets include all

(feasible) combinations of I's offer x and J's observed state

€

ˆ π .

Thus:

€

σJ1 ⇒ (x H , ˆ π H ); σJ

2 ⇒ (xL , ˆ π H ); σJ3 ⇒ (xL , ˆ π L ); σJ

4 ⇒ (0, ˆ π H ); and σJ5 ⇒ (0, ˆ π L )

. The information set

€

(x H , ˆ π L ) is not feasible because the high offer xH is not possible if

€

π = π L (see A1 below). As a result, if J observes xH, it will be certain that

€

π = π L . In

addition, in the interest of parsimony it makes sense to combine

€

σJ4 and σJ

5 into one

information set,

€

σ J4 ⇒ (0, ˆ π ) . 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 model’s 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.

€

B ≈ π . As a result, I cannot offer xH if

€

π = π L .9

9 Returning briefly to the formal treatments of single-party dominance by Magaloni (2006) and Greene (2007), note how this assumption tracks Magaloni’s supposition that the incumbent’s 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)—along with Botswana (Acemoglu, Robinson, and Johnson 2001) and Namibia (du Toit 1999)—the 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

€

π and its own type perfectly, and has full information about

€

p, β, ε, and k . A3. I strictly prefers re-election to absconding with the entire budget. Thus:

€

ρ > B ≈ π. A4. J strictly prefers to support I+ and vote out I-, regardless of x. Thus, J strictly

prefers to Reject any x if

€

ʹ′ β = 0 (i.e. if J believes I = I- with certainty) and Accept any x if

€

ʹ′ β =1 (i.e. if J believes I = I+ with certainty). More formally,

€

x H < δf < xL + f , or xH

f< δ <

xL

f+1.

Order of Play

The game is played as follows (see Figure 1):

1. Nature (N) reveals the state of the economy (

€

π ) and I’s 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 (

€

ˆ π ); J updates its beliefs about I’s type

4. J Accepts (A) or Rejects (R) I’s offer

generally advocated for centrist economic policies that do not differ greatly from that of the dominant party.

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Pure Strategy Nash Equilibria

In order to identify the pure strategy equilibria of the game, it is important to

note four ‘facts’ of the model. First, facing a high offer xH, J’s dominant strategy is to

Accept. Given A1, if J observes xH it can be certain that

€

π = π H (i.e. that times are

“good”). Because such a high, state-reflecting offer is made by I+ or by I- exactly

mimicking I+,

€

ʹ′ β will always be large enough to satisfy the “accept condition”

€

x + ʹ′ β f ≥δf . In terms of Figure 1, J always plays Accept at

€

σJ1.

Second, and relatedly, I’s action (xH,m)—combining a high offer with

propaganda—is not feasible. Because observing xH eliminates any uncertainty about the

state of the economy,

€

ε is forced to 0 and investing in propaganda becomes nonsensical.

Third, J’s dominant strategy is to Reject the incumbent if it absconds with the

entire budget (i.e. offers x = 0). This action fully reveals the incumbent’s type as I- and

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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 J’s decision to Reject,

so m = k = 0. In Figure 1, J always plays Reject at

€

σJ4 .

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,

€

σJ2 and σJ

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

€

π = π 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

€

β, p, or ε .

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 “accept condition” hold at both

€

σJ2 and σJ

3 . Specifically:

Proposition 1: {(xL,0),(xL,0); Accept} is a PSNE iff:

€

xL +β(1− p)ε

(1− β)p(1−ε) + β(1− p)ε + (1− β)(1− p)ε⎛

⎝ ⎜

⎞

⎠ ⎟ f ≥δf at

€

σJ2; and (3)

10 In general, equilibria are notated as {I’s strategy; J’s strategy}. Below, equilibira are notated more precisely as {I’s action at

€

π H , I’s action at

€

π L ; J’s action at

€

σJ2; J’s action at

€

σJ3}. We employ this form

because J’s actions at

€

σJ1 and

€

σJ4 are constant (always Accept and always Reject, respectively) given the

‘facts’ of the model presented above.

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16

€

xL +β(1− p)(1−ε )

(1− β)pε + β(1− p)(1−ε ) + (1− β)(1− p)(1−ε)⎛

⎝ ⎜

⎞

⎠ ⎟ f ≥δf at

€

σJ3, (4)

where the terms in parentheses capture J's posterior beliefs (

€

ʹ′ β , via Baye's Rule) at the

specified information sets. Mathematically, it is clear that, ceteris paribus, Proposition 1

requires a relatively large

€

β. Intuitively, if I- is to secure re-election with a low offer and

without employing propaganda, J’s 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

€

β (i.e.

€

β*), we find:

€

β* ≥

δf − xL

fp(1−ε ) + (1− p)ε[ ]

δf − xL

fp(1−ε ) + (1− p)ε

at

€

σJ2; and (5)

€

β* ≥

δf − xL

fpε + (1− p)(1−ε)[ ]

δf − xL

fpε + (1− p)(1−ε)

at

€

σJ3. (6)

To help interpret this equilibrium, we assume that ≤ ½; 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 —the probability that J observes the

opposite state from reality—is greater than ½. Second, the restriction ensures that

€

β* at

€

σJ2—where J receives a low offer while observing a growing economy—must be greater

than

€

β* at

€

σJ3—where 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

€

ˆ π H than when observing

€

ˆ π L . Indeed, in the former scenario,

Rosenberg Ch. 2

17

J’s prior belief that the incumbent is ‘True’ must be quite robust to withstand clear

evidence to the contrary.

Given our restriction on

€

ε , we can determine the values of p and

€

β for which

{(xL,0),(xL,0); Accept} is Nash. In the top panel of Figure 2, we hold

€

ε at 0.25 (in the

middle of the restricted range) and plot p against

€

β. Lines 2a and 2b track the values of

€

β

that satisfy inequalities 5 and 6, respectively, with the areas above each line capturing

€

β*

at the specified information sets. As the area above Line 2a satisfies both inequalities—

again, if J accepts xL at

€

σJ2, it must do so at

€

σJ3 as well—this area summarizes the

conditions for p and

€

β under which {(xL,0),(xL,0); Accept} is a PSNE.

These conditions are characterized by a positive, “push-pull” relationship between

p and

€

β: holding

€

ε constant, the more likely it is that

€

π = π H (i.e. the higher is p), the

stronger must be J's belief that I = I+ (i.e. the higher must be

€

β) 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 “swing” voter

approach to party responsiveness and accountability ((Lindbeck & Weibull 1987; Dixit &

Londegran 1996), whereby a party neglects its “core” supporters—who are likely to vote

for the party regardless—in favor of less partisan groups. In the Founding Party context,

this equilibrium also presents us with a variation on the “benefit of the doubt” 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.

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 incumbent’s 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

€

ε . As J becomes less accurate,

Line 2a shifts downward: the

€

β threshold (

€

β*) for each value of p is lowered, and the

equilibrium space grows. At the same time, Line 2b—which, recall, summarizes at

the more permissive —shifts up closer to Line 2a, reflecting the fact that as

increases, the probabilities that J observes (at

€

σJ2) and (at

€

σJ3) will converge. In

words, a less accurate J has greater difficulty discerning good times from bad times—and

vice-versa. Notably, as

€

ε increases, the downward shift

€

β* is larger in “good times” (p >

0.5) than in “bad times” (p < 0.5), revealing how J’s uncertainty about the state of the

economy grants I- greater scope to make a “low-ball,” rent accruing offer.

At lower values of

€

ε (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

€

ˆ π H and

€

ˆ π L diverge. As a result, Line 3a quickly loses

convexity,11 revealing a rising

€

β* at

€

σJ2 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

€

ε 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

!

"

!

ˆ " H

!

ˆ " L

!

"*

!

"J3

!

"J2

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}. Here—with J playing Reject at and —I-‘s best response

depends on the state of the economy. If , I- can avoid rejection by mimicking I+

and offering xH, in effect “moving” 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, “moving” 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

€

σJ2 [(xL , ˆ π H )], doing so at

€

σJ3 [(xL , ˆ π L )] instead. As a result, the equilibrium

area above Line 4a (the equilibrium conditions specified by Equations 3 and 5, i.e. at

€

(xL , ˆ π H ) ) is unlikely to apply to J.

!

"J2

!

"J3

!

" = " H

!

"J1

!

" = " L

!

"J1

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

β

p

Figure 2 Nash Equilibria: ε = 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

β

p

Nash Equilibria: ε =.35



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

β

p




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

β

p

Figure 3 Nash Equilibria: ε = 0.25



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

β

p




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

β

p




Rosenberg Ch. 2

22

Proposition 2: {(xH,0),(0,0); Reject} is a PSNE iff:

€

xL +β(1− p)ε

(1− β)p(1−ε) + β(1− p)ε + (1− β)(1− p)ε⎛

⎝ ⎜

⎞

⎠ ⎟ f ≤ δf at

€

σJ2; and (7)

€

xL +β(1− p)(1−ε )

(1− β)pε + β(1− p)(1−ε ) + (1− β)(1− p)(1−ε)⎛

⎝ ⎜

⎞

⎠ ⎟ f ≤ δf at

€

σJ3. (8)

Re-arranging the equations to solve for the (upper) thresholds yields:

at

€

σJ2 ; and (9)

€

β* ≤

δf − xL

fpε + (1− p)(1−ε)[ ]

δf − xL

fpε + (1− p)(1−ε)

at

€

σJ3. (10)

For the converse reasons from Proposition 1, Proposition 2 requires a relatively

low

€

β* to sustain the equilibrium (i.e. to sustain rejection at the low-offer information

sets

€

σ J2 and

€

σJ3). As above, we assume that

€

ε < 1/2, ensuring that

€

β* at

€

σJ3

€

[(xL , ˆ π L )]

must be less than

€

β* at

€

σJ2

€

[(xL , ˆ π 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

€

ε = 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

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

€

β 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

€

ε 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

€

ε (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

€

β below which J

will reject a low offer.

At the same time, we already know that higher values of

€

ε also decrease the

range of

€

β above which J will accept a low offer, increasing the scope of the

{(xL,0),(xL,0); Accept} equilibrium. What’s more, increases in

€

ε 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, J’s uncertainty about the state of the economy is more likely

to help I ‘low-ball’ 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

€

ε (i.e. a more accurate J) shrink the equilibrium space and pull

apart the “reject” conditions at

€

σJ2 and

€

σJ3 (see Figure 3): the lower is

€

ε , 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 I’s 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 incumbent’s budget is very big—there are simply fewer resources to observe.

!

"

!

ˆ " H

!

ˆ " L

!

"

Rosenberg Ch. 2

24

equilibrium conditions specified in Proposition 2—whereby J updates its beliefs at the

“wrong”

€

σJ3[(xL , ˆ π L )]—become much less applicable as decreases.17 In bad times, as J

becomes increasingly certain of the state of the economy, J’s beliefs about I must be

increasingly unfavorable to sustain rejection of a low offer.

In good times, then, the theory does not allow for rejection—given adequate

resources, a ‘rent-seeking’ incumbent always prefer to give J a high offer (mimicking a

‘true’ 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 “buy” 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

“face the music” 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 “good

times” 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-à-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

€

σJ3 [(xL , ˆ π L )], doing so at

€

σJ2 [(xL , ˆ π H )] instead. As a result, the equilibrium

area below Line 4b (the equilibrium conditions specified by Equations 3 and 5, i.e. at

€

(xL , ˆ π L )) is unlikely to apply to J.

!

"

Rosenberg Ch. 2

25

Before discussing any mixed strategy equilibria, an additional point warrants

mention. The above analysis has been conducted with —J’s belief that the Opposition

is “good”—set 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

opposition’s 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 party’s scope for rent seeking in good times and make sustaining J’s

support more challenging in bad times.

Mixed Strategy Nash Equilibrium

Where our PSNE do not exist—note the areas between the equilibrium spaces in

Figures 2 and 3—we must look for mixed strategy Nash equilibria (MSNE). The game

features a unique (see Appendix for proof) MSNE at

€

ʹ′ µ (xL ,m), (1− ʹ′ µ )(x H ,0), (xL ,0); γ (Accept), (1− γ )(Reject), Accept{ }. In words, this

equilibrium requires I- to mix between its action (xL,m) and (xH,0) if

€

π = π H (with

probabilities

€

ʹ′ µ and

€

1− ʹ′ µ , respectively) and to play the pure strategy (xL,0) if

€

π = π L . At

the same time, J mixes between its actions Accept and Reject at

€

σJ2 (with probabilities

€

γ

and

€

1−γ , respectively) and plays the pure strategy Accept at

€

σJ3 (with probability

€

λ =

1). As above, I+ always makes state-reflecting offers; J always accepts xH and rejects x =

!

"

!

"

Rosenberg Ch. 2

26

0; and ≤ ½.

To construct this equilibrium, we assume an m/k ratio—the cost-to-effect ratio of

propaganda—that is small enough to ensure that (xL,m) strictly dominates (xL,0) at

€

π H

(we label this assumption A5; see Appendix for proof).18 In words, we assume

propaganda is sufficiently effective at influencing J’s ability to observe the state of the

economy that I- will bear its costs when J’s acceptance of a low offer is uncertain. At

€

π 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:

€

ʹ′ µ (xL ,m), (1− ʹ′ µ )(x H ,0), (xL ,0); γAccept, (1− γ )Reject, Accept{ } is a MSNE if < ½ and:

; and (11)

€

γ =

ρ +mρ + r

− λ(ε + k)

1− (ε + k), where

€

λ =1. (12)

18 Given A3, we already know that (xH,0) strictly dominates (0,0) at

€

π 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

€

π H and J is indifferent between Accept and Reject at

€

σJ2.

Rosenberg Ch. 2

27

To interpret this equilibrium, we conduct comparative statics on Equations 11.21 Note that

analyses apply when

€

π = π H (i.e. in “good times,” when I- is playing mixed strategies).

Ceteris paribus:

1.

€

∂µ /∂β > 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.

€

∂µ /∂ε > 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.

€

∂µ /∂k > 0 :

As the effectiveness of propaganda increases, the incumbent is more likely to invest in it

(and make a low offer).

4.

€

∂µ /∂δ < 0 : The more favorable a group’s 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 group’s 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 (

€

∂γ /∂ε < 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

€

σJ2 [(xL , ˆ π 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

€

σJ2

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

€

ε force the probabilities that J observes

€

ˆ π H and

€

ˆ π L to

converge. As a result, the gap between

€

β* for the Accept PSNE (determined at

€

σJ2 ) and

€

β* for the Reject PSNE (determined at

€

σJ3 ) is reduced, and the mixed strategy

equilibrium space is shrunk (see Figure 3). At the same time, we know that increases in

€

ε

increase the likelihood that I- will target J with propaganda and a low offer in that space.

In other words—and in good times— higher values of

€

ε increase the probability the

(reduced) mixed strategy equilibrium space will be “filled” with propaganda and low

offers.

In this vein, it is helpful to think of I’s investment in propaganda as a way to

“push” J toward the Accept equilibrium—where the group will accept a low offer—and

away from the Reject equilibrium—where 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 I’s low offer at

€

σJ2 rather than

€

σJ3 —the 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 “benefit of the

doubt” while low-balling J, the Founding Party has a clear incentive to invest in ‘doubt.’

Lower values of

€

ε force the probabilities that J observes

€

ˆ π H and

€

ˆ π L to diverge,

expanding the ‘space’ 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

€

p,β, and ε ) 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).

Rosenberg Ch. 2

29

addition, we know that an increasing

€

ε 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 “push” J toward accepting a low offer, making it

less likely to be a worthwhile investment.

Independent of

€

ε , it is clear that the more effective the Founding Party’s

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 J’s ability to observe

the state of the economy (i.e. one that drives k toward its upper-bound of ½), it may be

targeted even at otherwise accurate groups. Put another way, k represents the size of the

“push” 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

€

β effects a Founding Party’s

strategy is rather straightforward. Looking at the mixed equilibrium spaces in Figures 2-

3, it is clear that the larger is

€

β, the more likely J will be located “near” Line 2a/3a and

the Accept PSNE. Thus, the more likely it is that J can be “pushed” into accepting a low

offer in good times by the incumbent’s propaganda. Of course, the reverse is true for

variation in

€

δ .

Observable Implications

The first observable implications of the theory stem from our definitions of

€

β and ε :

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 economy—and thus the size of the incumbent’s budget—than 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 “who gets what” 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 “good times”—when the government

enjoys a larger budget—than in “bad times.”

In “good times,” 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.

Rosenberg Ch. 2

31

Figure 4:

€

π = π H

5. Low-information groups with highly favorable beliefs (i.e. “core” voters) are the

‘cheapest’ 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 “the benefit of the

doubt.”

a. The more low-information, “core” 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. “swing” 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

Rosenberg Ch. 2

32

and services from the government to maintain their support. They are least likely to

give the party the “benefit of the doubt.”

a. The more high-information, “swing” 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 ‘doubt’) 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 “bad times:”

10. If citizens’ beliefs are relatively favorable, the Founding Party maintains popular

support despite the government’s provision of few good and services to its citizens.

a. In this case, the Founding Party accrues fewer rents than in “good times.”

11. If citizens’ beliefs are unfavorable, they will reject the Founding Party.

Rosenberg Ch. 2

33

a. In this case, the Founding Party becomes completely rent seeking vis-à-vis

these citizens

12. Citizens with more favorable beliefs about the opposition will be more likely to reject

the incumbent.

Figure 5:

€

π = π 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

citizens’ best responses are to reject it.

A More Traditional Approach to Propaganda

0

1

(0,0); Reject

Rosenberg Ch. 2

34

Above, the incumbent uses propaganda to manipulate a group’s 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 ‘True’ 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, ‘before’ 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 incumbent’s

efforts to emphasize its history, reminding citizens both of its role in the “struggle” and of

its delivery of independence or majority rule. In terms of the model, I attempts to buffer

its status as a “True” Founding Party independent of its offer to J or of the state of the

economy.

Using the model’s theoretical framework, we can represent this type of

propaganda as an added value (l) to J’s prior belief

€

β, or

€

β+l. We can then ask: how

might this “type l” propaganda affect the equilibria of the game? Because J’s prior

beliefs, manipulated or not, will always be updated via J’s observation of x and

€

ˆ π , 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 “given” than manipulating citizens’ ability to the state of the economy. 24 To do so, we would need to include such an investment among I’s available actions and strategies, which would in fact require the construction of an separate (and significantly more complex) model.

Rosenberg Ch. 2

35

strongly speculate on the question by noting the effects of an additive shift in

€

β on the

equilibrium outcomes described above.

Indeed, we already know the effects of an increased

€

β 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.

€

β+l would make Proposition 1

easier to satisfy—expanding the applicability of {(xL,0),(xL,0); Accept}—and make

Proposition 2 more difficult to satisfy—reducing 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 that—so long as it was not prohibitively expensive to do

so—a “rent-seeking” Founding Party would always employ this kind of propaganda.

Figures 2 and 3—depicting, once again, all the equilibria at different level of

€

ε—

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 group’s 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 group’s

characteristics (

€

β and

€

ε ) and the state of the world (p) leave the group short of this

threshold—as defined by Equation 5—type l propaganda might become an attractive

option for the incumbent, enabling it to induce acceptance. In effect, the propaganda

25 Of course,

€

β+l must be upper-bounded by 1.

Rosenberg Ch. 2

36

would simply shift Lines 2a and 3a down by l. In good times, this shift would expand I-‘s

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

€

β range will

always reject a low offer, making type l propaganda useless. However, if a “rejecting” J

falls close to the threshold defined by Equation 10, type l propaganda could “move” J out

of the Reject PSNE space, in effect shifting Lines 3a and 3b down by l. In this case, the

incumbent’s 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 incumbent’s use of type l propaganda is an

especially compelling possibility at higher values of

€

ε , whereby J is increasingly

uncertain about the state of the economy. In these cases, the addition of l to

€

β+ l could

actually “move” a group satisfying the Reject PSNE to satisfying the Accept PSNE—

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

€

β+ 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

€

ε was

very high, it could very well ensure it.

Crackdown and Coercion: Extending the ‘Reject’ Equilibrium

26 In this way, type l propaganda provides J with an even more explicit “push” 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 “moved” to the MSNE space. 28 In good times, this “switch” is only possible as

€

ε approaches its (still restricted) limit at 0.5.

Rosenberg Ch. 2

37

As mentioned briefly above, our theory depicts the founding party’s 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 citizens’ votes.

As such, when J ‘rejects’ the founding party and removes itself from the party’s coalition,

J opts to support some opposition force O, represented by the alternative flow payoff

€

δf .

In the interest of parsimony, our theory excludes many of the factors—the probability

that O could actually take power; the size of J versus other groups in the founding party’s

coalition—that 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 party’s dominant position but not so large as to threaten the

incumbent’s 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 Magaloni’s “punishment regime’), 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 party’s newly empowered opposition.

Given the significant costs of a coercive apparatus (CITES), we can expect a rent

seeking party—concerned primarily with maintaining power to ensure its access to state

resources—to 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

party’s coalition, the likelihood of this scenario increases.] In this case, the incumbent

Rosenberg Ch. 2

38

may crackdown on the opposition and its supporters while maintaining the façade 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 incumbent’s 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.

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 “good” times); investing in m does nothing to avoid rejection in this case. If xH is not feasible (i.e. in “bad” times), I-`s best response is to abscond; investing in k does nothing to prevent rejection. Proof 2:

€

ʹ′ µ (xL ,m), (1− ʹ′ µ )(x H ,0), (xL ,0); γ (Accept), (1− γ )(Re ject), Accept{ } is a unique MSNE. 2a. Given A3, I-`s action

€

(x H ,0) strictly dominantes (0,0) if . In addition,

€

(xL ,m) strictly dominantes (xL ,0) so long as:29

€

((1− (ε + k))γ (r + ρ) + (ε + k)λ(r + ρ) > (1−ε )γ (r + ρ) +ελ(r + ρ)k(λ − γ )(r + ρ) > m

k >m

(λ − γ )(r + ρ)

By contrast,

€

(xL ,m) cannot dominante (xL ,0) when

€

π = π L because:30

€

(ε + k)(γρ −m) + (1− (ε + k))(λρ −m) > εγρ + (1−ε)λρk(γ − λ)ρ > m

k >m

(γ − λ)ρ is non - sensical

For a similar reason we know that I cannot be indifferent between

€

(xL ,0) and (0,0) when

€

π = π L :31

29 Because k must be positive this condition is sensible.

€

λ - the probability that J accepts a low offer at

€

σJ3(xL , ˆ π L )should always be larger than

€

γ - the probability that J accepts a low offer at

€

σJ2(xL , ˆ π H )

30 The condition is nonsensical because

€

γ - the probability that J accepts a low offer at

€

σJ2(xL , ˆ π H ) -

cannot be higher than

€

λ - the probability that J accepts a low offer at

€

σJ3(xL , ˆ π L ) .

31 Again,

€

γ cannot be higher than

€

λ .

!

" = " H

!

" = " H

Rosenberg Ch. 2

40

€

ρ[γε − (λ(1−ε ))] = π L

λ ≠γε − π

L

ρ1−ε

2b. If J is indifferent between Accept and Reject at

€

σ J2(xL , ˆ π H ), J will play Accept for certain

at

€

σJ3(xL , ˆ π L ):

J’s indifference condition at

€

σJ2 is:

€

xL +β(1− p)ε

β(1− p)(1−ε) + (1− β)pµ(1− (ε + k)) + (1− β)(1− p)ε⎛

⎝ ⎜

⎞

⎠ ⎟ f = δf

J’s indifference condition at

€

σJ3 is:

€

xL +β(1− p)(1−ε)

β(1− p)(1−ε) + (1− β)pµ(ε + k) + (1− β)(1− p)(1−ε )⎛

⎝ ⎜

⎞

⎠ ⎟ f = δf

Given that

€

ε ≤12

, we know that if J is indifferent at

€

σJ2 the indifference condition at

€

σJ3

cannot hold. More specifically, we know the LHS will be greater than

€

δf , such that J will always accept

€

xL at

€

σJ3.

By the same token, we know that if J is indifferent at

€

σJ3(xL , ˆ π L ), J will always reject

€

xL

(i.e. play Reject for certain) at

€

σJ2(xL , ˆ π H ). This possibility, however, is nonsensical: if

€

γ

(the probability that J accepts xL at

€

σJ2) equals 0, then I’s best response function when

€

π = π H requires that

€

λ (the probability that J accepts xL at

€

σJ3) is greater than 1:

Per Equation 12:

€

γ =

ρ +mρ + r

− λ(ε + k)

1− (ε + k)→λ =

ρ +mρ + r

−γ

(ε + k)+γ

Rosenberg Ch. 2

41

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Chapter 2: A Theory of Founding Party Dominance

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