Yardstick Competition to Tame the Leviathan

This papers analyzes the disciplining role of elections under asymmetric information when voters have to rely on relative performance evaluation to tame the Leviathan. If elections are held in different regions, voters are able to reduce political rents below the Leviathan outcome by carrying out adequate retrospective voting strategies. The paper compares a multi-candidate model to a two-party system with either independent or coordinated policies in the various regions. In general, voters are worse off in the two-party system. However, it is shown that the power of voters is strengthened in some sense by the two-party system if each party has a uniform leadership which determines policies in all regions