13. Two-period electoral competition with imperfect information

Suppose that an incumbent of unknown quality chooses a policy, and a citizen with limited information about the incumbent observes the outcome and either reelects the incumbent or elects a challenger. If the citizen does not know the incumbent's preferences, and the incumbent's payoff to holding office is high, then there is an equilibrium in which all incumbents choose a policy that the citizen likes. If all incumbents' preferences conflict with the citizen's, effort is required by the incumbent to produce an outcome the citizen likes, and the incumbent's payoff to holding office is high, then there are equilibria in which the incumbent exerts low effort and also ones in which she exerts high effort and is reelected only if the outcome is good for the citizen. If the citizen is uncertain about the policy that is best for her, which depends on a state the incumbent knows, and the incumbent's payoff to holding office is high, then some incumbents choose a policy the citizen believes is best for her, even if the incumbents know that it is not. In this case, the policy chosen by a random citizen may be better for the citizen.