Structure-Induced Equilibria and Perfect-Foresight Expectations

Abstract

This paper extends the work on structure-induced equilibria by explicitly considering voters' expectations. The standard assumption of myopic expectations is contrasted with the alternative assumption of perfect-foresight expectations. In the institutional setting examined perfect foresight means voters know how the outcome on the first issue in a sequence of two issues conditions majority-rule outcomes on the second issue. If voters act on this knowledge when voting on the first issue, then several important results follow. First, voters may possess multipeaked preferences defined over the first issue with a majority cycle resulting so that there is no equilibrium to the whole sequence of elections. Second, even if cycling does not result, the exact location of the equilibrium involves a broader conspiracy than previously thought-a conspiracy of not only preferences and institutional structure but also voters' expectations as conditioned by that structure.