Martin Vaeth, Princeton University (Job Market Seminar)

“Rational Voter Learning, Issue Alignment, and Polarization”

Abstract

We model electoral competition between two parties when voters can rationally learn about their political positions through flexible information acquisition. Rational voter learning generates polarized and aligned political preferences, even when voters’ true positions are unimodally distributed and independent across policy issues. When parties strategically select their positions to influence voter learning, voter and party polarization increase as information costs decline, and parties may adopt positions more extreme than their ideal policies. These results arise from two new forces introduced by endogenous voter learning: parties have an incentive to moderate to skew voter learning in their favor, and the more extreme party may diverge to trigger more voter learning and reduce the skew toward their opponent. We then adapt our model to a market setting with horizontally differentiated goods when consumers learn about their product preferences. Lower information costs increase product differentiation and moreover enable firms to charge higher markups, reducing consumer welfare. These results show how lower information costs can reduce welfare in both political and economic contexts.

Contact person: Peter Norman Sørensen