Embracing the Enemy
· restud.com
A principal (such as a centrist political party) can partially influence the allocation of power between two competing parties. The principal is closer to one party, the “Friend”, than to the other, the “Enemy”. The principal’s optimal contract initially seeks to exclude the Enemy. However, once the Enemy gains power, the principal embraces him in exchange for policy moderation.
Alvaro Delgado-Vega, University of Chicago and Johannes Schneider, JKU Linz
A principal (such as a centrist political party) can partially influence the alloca...