A citizen-candidate model of party formation

There are multiple models of party formation in the political economy literature. However, most of these works consider individuals as parties and do not model parties as a group of candidates. In this paper, we follow the latter approach and assume that parties form as a result of mutually agreeable links between candidates. We consider a citizen-candidate model of electoral competition where candidates decide whether they want to participate in election alone or offer links to adjacently placed candidates on a one-dimensional policy space. We characterize one-party and two-party equilibrium and show that no multi-party equilibrium exists with three or more parties. We provide conditions on the rents of winning with respect to the cost of participating in election which also depend on the number of candidates. We provide new insights which explain party formation from the perspective of group formation. Our results confirm the Duverger’s law and are consistent with empirical evidence on plurality voting systems.