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Expected Utility and Political Decision Making  

Jona Linde

Expected utility theory is widely used to formally model decisions in situations where outcomes are uncertain. As uncertainty is arguably commonplace in political decisions, being able to take that uncertainty into account is of great importance when building useful models and interpreting empirical results. Expected utility theory has provided possible explanations for a host of phenomena, from the failure of the median voter theorem to the making of vague campaign promises and the delegation of policymaking. A good expected utility model may provide alternative explanations for empirical phenomena and can structure reasoning about the effect of political actors’ goals, circumstances, and beliefs on their behavior. For example, expected utility theory shows that whether the median voter theorem can be expected to hold or not depends on candidates’ goals (office, policy, or vote seeking), and the nature of their uncertainty about voters. In this way expected utility theory can help empirical researchers derive hypotheses and guide them towards the data required to exclude alternative explanations. Expected utility has been especially successful in spatial voting models, but the range of topics to which it can be applied is far broader. Applications to pivotal voting or politicians’ redistribution decisions show this wider value. However, there is also a range of promising topics that have received ample attention from empirical researchers, but that have so far been largely ignored by theorists applying expected utility theory. Although expected utility theory has its limitations, more modern theories that build on the expected utility framework, such as prospect theory, can help overcome these limitations. Notably these extensions rely on the same modeling techniques as expected utility theory and can similarly elucidate the mechanisms that may explain empirical phenomena. This structured way of thinking about behavior under uncertainty is the main benefit provided by both expected utility theory and its extensions.

Article

Strategic Voting Versus Sincere Voting  

Damien Bol and Tom Verthé

People do not always vote for the party that they like the most. Sometimes, they choose to vote for another one because they want to maximize their influence on the outcome of the election. This behavior driven by strategic considerations is often labeled as “strategic voting.” It is opposed to “sincere voting,” which refers to the act of voting for one’s favorite party. Strategic voting can take different forms. It can consist in deserting a small party for a bigger one that has more chances of forming the government, or to the contrary, deserting a big party for a smaller one in order to send a signal to the political class. More importantly the strategies employed by voters differ across electoral systems. The presence of frequent government coalitions in proportional representation systems gives different opportunities, or ways, for people to influence the electoral outcome with their vote. In total, the literature identifies four main forms of strategic voting. Some of them are specific to some electoral systems; others apply to all.

Article

Sunk Costs and Political Decision Making  

Charles A. Miller

The “sunk costs fallacy” is a popular import into political science from organizational psychology and behavioral economics. The fallacy is classically defined as a situation in which decision-makers escalate commitment to an apparently failing project in order to “recoup” the costs they have already sunk into it. The phenomenon is often framed as a good example of how real decision-making departs from the assumption of forward-looking rationality which underpins traditional approaches to understanding politics. Researchers have proposed a number of different psychological drivers for the fallacy, such as cognitive dissonance reduction, and there is experimental and observational evidence that it accurately characterizes decision-making in certain contexts. However, there is significant skepticism about the fallacy in many social sciences, with critics arguing that there are better forward-looking rational explanations for decisions apparently driven by a desire to recoup sunk costs – among them reputational concerns, option values and agency problems. Critics have also noted that in practical situations sunk costs are informative both about decision makers’ intrinsic valuation for the issue and the prospects for success, making it hard to discern a separate role for sunk costs empirically. To address these concerns, empirical researchers have employed a number of strategies, especially leveraging natural experiments in certain non-political decision making contexts such as sports or business, in order to isolate the effects of sunk costs per se from other considerations. In doing so, they have found mixed support for the fallacy. Research has also shown that the prevalence of the sunk costs fallacy may be moderated by a number of factors, including the locus of decision-making, framing, and national context. These provide the basis for suggestions for future research.