Party Formation and Policy Outcomes under Di ff erent Electoral Systems ∗

I introduce a simple model of representative democracy that allows for strategic parties, strategic candidates, strategic voters, and multiple districts. If the distribution of policy preferences is not too heterogeneous across and within districts, then the number of effective parties is larger under Proportional Representation than under Plurality Voting, confirming Duverger’s hypothesis, and both electoral systems determine the median voter’s preferred outcome. However, for very asymmetric distributions of preferences Duverger’s hypothesis can be reversed, and the policy outcome can differ from that of direct democracy: compared with the median voter’s preferred outcome, the policy outcome with Proportional Representation can be biased only towards the center, whereas under Plurality Voting the policy outcome can be anywhere. Strategic and sincere voting are indistinguishable in the presence of endogenous candidates and strategic parties.