The political economy of ideology

This dissertation is composed of three essays. The common methodological thread is game theory and the main theme is the role of ideology in political economy. The first essay is a contribution to imperfect monitoring in an infinitely repeated game. The second and main essay uses that result to build a political economy model that explains why some efficient policies might not be carried out by a government, what type of government may overcome such difficulties, and why that same type of government may be prone to inertia. The third essay presents an electoral model in which informed political parties compete, through shifts in their platform, for the vote of an uninformed electorate. In equilibrium parties will always adhere to a single (differentiated) platform and thus become identified with a set of beliefs, a key assumption in the second essay.;The first essay shows that the ability of a principal to elicit repeated actions from an agent is severely handicapped by introducing the possibility of an alternate state of the world where such actions are not desirable if punishment is not costless to the principal. Only a principal with extreme priors will prevail in the ex-ante desirable policy. This gives rise to incentives to delegate enforcement and presents a warning as to the possible consequences of such delegation.;For the second article, I show that a government's commitment to an efficient punishment policy is compromised by introducing the possibility that the policy was designed under flawed premises if the government internalizes at least some of the costs of punishment. The only type of government that is able to implement such a policy is subjectively certain about the true state of the world. I call such a government an ideological extremist and observe that this ability helps explain why society may elect such governments even if it doesn't share its beliefs. Once elected, if the policy is flawed, the ideological extremist is unable to interpret bad outcomes as evidence that reform is required. Inertia stemming from ideology ensues.;The final essay presents a game between a pivotal voter and two informed political parties where there is uncertainty in the effects of policy and preferences. There is a unique equilibrium, with platform divergence, that is uninformative and "dogmatic", i.e. each party proposes the same (differentiated) policy regardless of the state.