Ideologies, status quo, and parties' outside options in parliamentary politics

• Published in: International journal of economic theory Vol. 12; no. 3; pp. 279 - 297
• Main Authors: Tsai, Tsung-Sheng, Yang, C. C.
• Format: Journal Article
• Language: English
• Published: Oxford Blackwell Publishing Ltd 01.09.2016; Wiley Subscription Services, Inc
• Subjects: Economic models; government formation; outside option; parliamentary system; status quo
• ISSN: 1742-7355; 1742-7363
• DOI: 10.1111/ijet.12094

This paper discusses the effect of the status quo policy versus parties’ “outside options,” which are defined as the benefits when parties are not in government, on the determination of the political equilibrium in parliamentary politics. As the value of outside options increases, the status quo becomes less important relative to outside options in terms of the parties’ bargaining strength. It is shown, among other things, that if the value of outside options is intermediate, two extreme parties may form a “disconnected coalition” in equilibrium; and if the value of outside options becomes sufficiently high, the status quo no longer maintains its grip on outcomes and the median‐voter theorem holds in essence.