A Drawback of Electoral Competition Alessandro Lizzeri Nicola Persico New York University and CEPRy University of Pennsylvaniaz x Abstract 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 is the number of parties, the greater the ine¢ ciency 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 <
[email protected]>, Persico <
[email protected]>. 1 of the outcome of electoral competition. The reason is that when the number of parties increases, electoral incentives push each party to focus its electoral promises on a narrower constituency, and special interest policies replace more e¢ cient policies which have di¤use bene…ts. The analysis provides a possible explanation for the existence of insti- tutional features that limit the extent of electoral competition: thresholds of exclusion, run-o¤ electoral systems, and majoritarian two-party political systems. JEL classi…cation: D82, L15 2 1 Introduction Political parties seem to be few, especially when compared to the number of distinct preference pro…les held by voters.