Monopoly aspects of political parties

Conclusions The standard economic model of a natural monopoly offers a useful conceptual means to examine some of the characteristics of political parties. The declining cost curves for producing political products are attributable to the indivisible nature of the majority asset. In the absence of subsidies, political parties can be expected to produce at the point where their marginal evaluation equals average cost. Thus, they have an incentive to seek subsidies in order to expand production to the point where marginal evaluation equals marginal cost. While this is optimizing behavior on the part of the individual party, it may not be optimal in competing for the majority asset, because this process decreases the value of resources that the other party has expended towards acquiring the asset. Parties will determine their optimal output calculating only the private costs and benefits to be secured through party competition, but will ignore the social costs caused by the externality they generate in competing for a fixed percentage of votes. As a result, optimizing behavior by the individual parties may lead to an excess of resources devoted to producing political decisions.