The name is absent

We thus have:

Proposition 2

In a proportional electoral system, the unique equilibrium outcome has four
parties represented in the legislature. As a result, only coalition governments are
observed.

The fact that small parties in coalition governments extract as much rents
as large parties in single-party governments keep parties from merging. Note
that the electoral rule plays an important role here: as PR makes vote shares
equal to seat shares, merging yields no particular advantage by extending the
voter base. As we shall see in the next section, this is no longer the case under
plurality rule. Note also that the model suggests that it may be hard to test
the prediction in Proposition 1 about the behavior of coalition and single-party
governments under proportional elections. In the model the prediction concerns
an unobserved counterfactual: by Proposition 2, we should not observe any
single-party governments under proportional elections. Of course, the model is
very symmetric and simple, and with enough asymmetries, say in the seat shares
of voters across economic groups, or in the size of the groups, we may be able to
generate equilibria with two or three parties — see Section 5 below.

4. Majoritarian elections

Under majoritarian elections, the population is divided in a continuum of single-
member electoral districts. Each of these districts carries out a plurality-rule
election where the party winning the largest vote share wins the single seat. In
the event of a tie in a district, a coin is tossed between the parties with the same
vote share. In this section, we assume that the distribution of economic groups is
the same in all districts. But this assumption is relaxed in Section 5.

4.1. Equilibrium policy

4.1.1. Coalition government

Equilibrium seat shares Suppose that parties 1 and 2 are in a coalition gov-
ernment. Equilibrium vote shares, v^P , are still given by (3.1) in the previous
section, which relates votes to government policy and the popularity shock, δ.
But now the formula for translating votes into seats is plurality rule. Because
of the model’s symmetry including the effects of the single random shock δ, the

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