Econ Gov (2017) 18:239273

DOI 10.1007/s10101-017-0193-9

ORIGINAL PAPER

Political regimes: a coalition formation approach

Ahmed Saber Mahmud1

Received: 24 August 2016 / Accepted: 11 April 2017 / Published online: 27 April 2017
Springer-Verlag Berlin Heidelberg 2017

Abstract What leads to the stability of a particular regime and what causes its demise?
With the aid of formal modeling, the paper illustrates the necessary and sufficient
conditions for different political regimes to exist. The game involves two factions
representing the differing interests of the civil society and the armed forces of a nation.
We illustrate the emergence of political regimes that includes both unconstrained and
constrained democracies, both military and civilian autocracies and an alliance formed
by a segment of the civil society and the military.

Keywords Democracy Military regime Coalition formation

JEL Classification O13

1 Introduction

What causes autocracies? Under what conditions is a democratic regime established

by the civil society? What is the motive behind a civil-military alliance? The purpose
of this paper is to provide a formal game-theoretical model to show the emergence of
different political regimes based on different coalition structures. We consider a game
among two groups in a civil society that can potentially form two political parties and
the military.
These two groups differ with regards to their preferences for consumption of public
good. For instance, one group prefers investment in cleaner energy and the other

B Ahmed Saber Mahmud

amahmud2@jhu.edu

1 Applied Economics Advanced Academic Program, Johns Hopkins University,

Washington, DC, USA

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240 A. S. Mahmud

prefer more expenditure in national defense.The military in contrast to these two

groups has no numerical strength and by itself can never win an election. Despite
being outnumbered by these civilian groups, the power of military lies in its combat
ability and could potentially be a challenge for others in a conflict.
The game occurs in three stages. In the first stage, coalitions are formed sequentially
across groups. In the second stage, conflict occurs between coalitions as each coalition
formed in the first stage decides whether or not to fight against the other coalitions.
The coalition that emerges as a winner in the second stage maximizes the payoff of
the coalition in the third stage.
The main contribution of the present paper is in constructing a model to illustrate
how different political regimes emerge. Furthermore, the present endeavor illustrates
real-world examples that can be derived from the model. The following political
regimes emerge as a result of political equilibrium in our model:

Military Regime: When the military is too strong compared with civil society, an
absolutist state is established. If the civil society as a whole is unable to credibly
threaten the authoritarian regime, the military has no incentive to form an alliance as
dictatorships can be established without it. In this context, the history of democracy
in India and Pakistan are contrasted to illustrate the role of the military.
Civilian Autocracy: The military is not the only source of power that can undermine
competitive politics. A very strong political party can achieve the same end as
well. When a particular political group is too strong vis--vis others (including
the military), a single-group dictatorship is the outcome. The obvious examples
are former communist regimes such as the former USSR and China in which
the overwhelming power of one party undermines the emergence of competitive
politics.
Unconstrained Democracy: Democracy is plausible in societies in which the civil
society, despite deep schisms within itself, is willing and able to prevent the trans-
gression of its rights by the military. Civil society as a whole needs to be strong
enough to resist a military takeover. Examples include the emergence of democracy
in England and the United States.
Civil-Military Alliance: If a certain segment of the civil society gives allegiance to
the armed force, a nondemocratic regime emerges with civil-military collaboration.
A civilian group would concede that such collaboration when winning an election
seems a less attractive option. In Germany, such alliances were prevalent (Moore
1966).
The Grand Alliance: All three groups share the power. The civilian groups alternate
via election but since the military till maintains credible threat, part of the revenue
is spent on the military. This is a plausible outcome when neither the civilian
groups together nor the civil-military alliances can win their battle uncontested.
Therefore, sharing the power emerges as the best possible option.

2 Literature

The contribution of the paper to the current literature is as follows.

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Political regimes: a coalition formation approach 241

First, this paper does not depend on income inequality as in Acemoglu and Robinson
(2001) and Boix (2003). Instead here different political regimes can emerge in both
equal and unequal societies as long as two groups differ in their preferences for public
consumption. Both economists and political scientists have looked at the present issue
through the lens of income inequality.
Acemoglu and Robinson (2001) showed that more inequality leads to a greater like-
lihood for both coups and revolutions. Boix (2003) observing the period from 1950 to
1990 argued that there is a negative relationship between inequality and democracy. An
increase in inequality increases the likelihood of both the excluded and the incumbent
group to grab power. Houle (2009) using a different measure of inequality found little
support for the negative relation with inequality. In many cases, the conflict may not be
between the rich and the poor but between two different groups. The present endeavor
abstracts away from either group interests or economic inequality by assuming that
there exist two groups.
Second, in addition to two groups, there is a third factor: the military. The military in
the developing world undermines the democratic process frequently. The paper shows
how the interaction between the military and different groups of the civil society can
still lead to the emergence of democracy. Our focus here is to explain how despite its
existence, how democracy can still.
An extensive literature that identifies the origins of military interventions in the mil-
itarys institutional or political interests (Janowitz 1964; Nordlinger 1977; ODonnell
1973), the degree of professionalization (Huntington 1957; Perlmutter 1977; Stepan
1988), the erosion of a political culture (Finer 1962), and the operational aspects of
interventions (Luttwak 1968). This paper argues that not only the power of the existing
military but also the lack of unity in the civil society can lead to military dictatorship.
Sometimes the low probability of winning an election leads to a civil-military alliance
between a segment of the civil society and the military.
Acemoglu et al. (2008), Debs (2009) and Geddes (2009) related the emergence of
military dictatorships to authoritarian repression and economic inequality. The present
paper looks not at inequality per se but more generally at the existence of two groups
of the civil society. Debs (2009) and Geddes (2009) focused on the survival of military
dictators rather than on what originates military intervention in politics, in contrast to
the emphasis of the present article.
Third, we allow each group to form coalitions sequentially in the first stage and enter
into the political contest in the second stage. Sequential formation of coalition allows
each group to foresee the expected outcomes of the second stage from excluding and
including groups from their coalition. By focusing on stable coalitions, the analysis
identifies conditions under which democracy can persist.
Beginning with Przeworski (1991), there is a small literature on self-enforcing
democracy. According to Przeworski to stabilize democracy, political parties must
accept electoral results. The losing party must not challenge the results, as the payoff
of a conflict is lower than the discounted payoff of winning in the future. Similar
to Przeworski (1991), we consider two factions of civil society competing for the
rule of a country. In a subsequent model, Przeworski (2005) explored why certain
income thresholds are necessary to ensure the stability of a democratic regime. Unlike
the models above, the present paper, also, has a third party that is small in number

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242 A. S. Mahmud

but strong in military prowess. The present analysis, therefore, provides additional
conditions for democratic stability.
In an important more recent contribution Fearon (2011), showed that an election
provides a signal to the citizens to coordinate rebellion if the ruler has not governed
properly. The possibility of winning an election in the future creates self-enforcing
democracy. Fearon also pointed out that when a ruling faction controls the army, it
may prefer to fight after losing an election. The present endeavors emphasis is on how
different political regime emerges rather than on the efficacy of the electoral system.
Last, the paper illustrates how different parametric values can lead to the emergence
of particular political regimes. In this context, the present paper also relates to the
literature on the emergence of the state. In the context of medieval Genoa, Greif
(1998) was the first to model the origin of a coercive force as preserving self-enforcing
political equilibrium. Bates et al. (2002) argued that one cannot begin by assuming that
the state is a protector; only in equilibrium does the state become a protector. North
and Weingast (1989) illustrated how the power of the king was checked in England.
The monarchs own need to raise money in combination with the ability of the feudal
nobility to check royal power resulted in a constitutional monarchy. In many nations,
the existence of a coercive force (e.g., a military) is not selected by the civil society
but exists a priori. In our context, we analyze how the existence of a similar institution
can undermine or reinforce the stability of the democratic system that can lead to the
emergence of other political regimes.

3 Set-up

There are three players: two groups from the civil society (Groups A and B) and the
army (G). The utility of two groups are obtained from private and public consumption.
The private consumption has the following functional form (see Persson and Tabellini
2000):
V = C + (x).

C is the private consumption of goods and x is the amount of leisure consumed. Labor
(l) and leisure (x) adds up to 1 unit: l + x = 1. The untaxed income of the individual
is l. And the private consumption C is (1 )l; is the tax rate. The utility becomes:

V = (1 )l + (1 l).

The utility in private consumption is increasing at a decreasing rate with respect to

labor. Maximizing with respect to labor leads to the optimal amount of labor as a
function of the tax rate: l = L( ). The total tax revenue of the economy is: T =
L( ). We can write the utility as: W (T ). This tax revenue is spent on public goods
and the consumption of the military. There are two types of public goods: g A , g B .
The consumption of the military is referred to as: G. The private consumption can be
written as:
W (T ) = W (gi + g j + G); T = gi + g j + G.

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Political regimes: a coalition formation approach 243

This is the cost of providing these public goods in terms of private consumption because
these goods are financed via taxation. This is expressed as W (): decreasing at an
increasing rate in the arguments. The utility
 functions from public good consumption
of two groups are as follows: Ui gi , g j . The utility of each group member belonging
to A and B by combining private and public consumption can be surmised as:
   
Ui gi , g j W gi + g j ; i = j = A, B.

G on the other hand enjoys the tax revenue without the burden of taxation: UG (G).
The maximum extractable revenue is G. G is obtained from maximizing T = L( )
with respect to the tax rate . We have the following assumptions on utility functions:
   
Assumption 1 Ui gi , g j W gi + g j is concave in gi ; i = A, B.
   
The indifference curves U = Ui gi , g j ; i = A, B are not convex in gi , g j :1 .
UG (G) is concave in G.
The indifference curves with respect to public goods are concave. Concavity of
indifference curve can have either or both of the following implications:
There are economies of scale in the provision of a particular public good.
Increasing public goods provision of one type reduces the marginal benefit of the
other.
Scale economies incorporate such examples as building a bridge in certain areas
that require indivisible investment. Whereas decreasing marginal benefit with respect
to the other type of public good reflects policy incompatibility between two groups.
Utility maximization leads to:
   
Max Ui gi , g j W gi + g j gi = gii , g j = 0.

For simplicity, we assume symmetry. In other words, U g A =

A U B
g B for g A = g B . This
leads to g AA = g BB . There are three stages of the game.

3.1 Stage 1: Coalition formation

All three groups: A, B and G, decide to form coalitions using sequential formation
of coalition. This treatment is limited by the assumption that agreements can only be
written between members of an existing coalition. It is as if all of the agents gather
together in a room. In the course of their bargaining, they decide with whom they prefer
to form a coalition. The agents carry out these meetings with the expectation that when
coalitions are formed, the agents will act cooperatively within the coalition and will
have binding contracts to not to fight among themselves and fight together against the

1
   
Ui 2 2 Ui Ui 2 2 Ui U Ui 2 Ui
+ 2 i > 0; i = A, B.
g A g 2B g B g 2A g A g B g A g B

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244 A. S. Mahmud

rest. Although the intracoalition interactions become cooperative, the intercoalition

interactions remain noncooperative and fighting can occur across coalitions.
The game proceeds in the following way in Stage 1. Group A proposes a coalition
to which it belongs. It can be {A, B, G}, {A, B} or {A, G}. Others involved either
accept or reject the proposal. If rejected, one who rejected proposes a coalition to
which it belongs. If all the members agreed to the initial offer, a coalition is formed,
and the game proceeds with the rest of the players. Once the coalition is formed, the
members are assumed to carry out their commitments in Stage 2. Offers to join the
coalition are made sequentially by members; everyone can make rational predictions
about the actions of the others.

3.2 Stage 2: Conflict

Stage 2 is the noncooperative stage, in which each coalition chooses to fight or not fight
against the others. Each coalition chooses {F, N F}. In any given coalition structure,
one coalition decides {F, N F} and the other coalitions respond by {F, N F} in a
sequential game.
(i) All of those coalitions who choose F, fight among themselves and the winner
becomes the ruler.
(ii) If one coalition chooses not to fight, it can never attain political power.
(iii) If only one coalition chooses F, then that particular coalition becomes the ruler.
(iv) If every coalition chooses NF, none attains political power.
The cost of waging a war per period is c for A, B and G. The probabilities of winning
alone for A, B and G respectively are: P A , P B , and PG ; P A + P B + PG =1. If all three of
them are fighting against each other, the probabilities are: P A , P B and PG . We assume
all parties have positive probabilities of winning a war, P A , P B , PG . When A and B
are fighting each other, the probabilities of winning for A and B are: PAP+P A
B
, PAP+P
B
B
.
The same applies for any two coalitions fighting against each other. When G and A
together are against B, the odds become: (1 PB ) and PB ; 0 < < 1. It is held
that when two are against one, the probability of winning is greater than the sum of
their individual strengths. Thus, when B is fighting against coalition of A and G, the
probability of A and G winning is (1 PB ) > PA + PG . The same applies for the
coalition {A, B} against {G} and the coalition {B, G} fighting against {A}.

3.3 Stage 3: Payoffs

Winners and losers from the noncooperative game are decided. The winning coalition
maximizes the joint payoff. This is similar to citizen-candidate models in which the
group in power maximizes own welfare and the group that is not in power has no
influence.
 [{A}, {B}, {G}]: Each agent forms a singleton and maximizes its own payoff on
winning. If {G} wins:
 
G ; i = A, B.
u iG , u Gj , u G (Military Regime)

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Political regimes: a coalition formation approach 245

     
where u iG = Ui (0, 0) W G , u Gj = U j (0, 0) W G , u G
G = UG G . The
utilities obtained from winning by i = A, B:

[u ii , u ij , u iG ]; i = A, B. (Civilian Autocracy)

     
where u ii = Ui gii , 0 W gii , u ij = U j g ij , 0 W g ij , u iG = UG (0).
 [{A, B}, {G}]: If the coalition {A, B} wins, either A or B is chosen to rule via
electoral mechanism in a particular period. Electoral mechanism requires repeated
game to be played between A and  B. The ex ante expected payoffs per period when

i j
{A, B} is winning is vi u i +v j u i ; i = A, B where vi is the probability of winning
an election by group i. Elections are won or lost. The payoff of the loser will determine
whether this repeated game will be continued or not. Assumingthe discount rate to
j
i j
be , the loser obtains per period payoff: E Vi = (1 )u i + vi u i + v j u i .
D

For G when the battle is lost, the payoff is UG (0). The payoffs for all three groups
when {A, B} wins are:2
 
E Vi D , E VBD , UG (0) ; i = A, B. (Democracy)


If G wins, the payoffs across coalitions are: u GA , u G
B , uG .
G

 [{ j, G}, {i}]: In case, the coalition { j, G} wins against {i}, the joint welfare (the
sum of utility functions) is maximized:
   
Max U j g j , gi + UG (G) W gi + g j + G g Jj , gi = 0, G Jj

The payoffs when i is the losing party are:

 
j j

u ij ,  uG .
u j,  (Civil-Military Alliance)
   
j j
where u ij = U j 0, g Jj W g Jj + G Jj ,  u j = U j g Jj , 0 W g Jj + G Jj , 
uG =

UG G Jj . In case, i wins, the payoffs of B being the dictator are realized:
 
u ii , u ij , u iG
 [{A, B, G}]: this is the case when grand coalition is formed. Again A and B find it
optimal to rotate via election since joint maximization over (g A , g B ) is less preferable.
When i is in power, i and G jointly maximizes their welfare. The payoffs are similar
to joint maximization of i and G. In other words, it is democracy but the tax revenue
is shared (denoted by S). The expected outcomes are:
 
E ViS , E V jS , E VGS (Grand Alliance)

2 According to Przeworski (1991), the payoff of the loser in an election determines whether or not the
democratic regime will continue. Therefore, the ex post payoff of the loser in an election is required to
determine the emergence of democratic regimes.

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246 A. S. Mahmud

A
B 
  
j j
where E VGS = v A 
uG + vB 
u G ; E ViS = (1 ) u ii + v j 
u i + vi  ui ; i =
A, B.
j j j
Lemma 1 (a) u j > 
u j > u j . (b) E V jS < E V jD f or j = A, B and E VGS = 
u GA =
B > E V D.
uG G

To ensure that at least one group chooses F even when others are choosing N F in
Stage 2, we assume:


i 
Assumption 2 (a)Min E Vi D ,  u ii c > 0. (b) 
u G c > 0; i = A, B.

This assumption eliminates the possibility of everyone choosing N F.

Definition (Uncontested win): In a coalition structure  (), a coalition can win against
others uncontested if the particular coalition chooses F while others choose N F.

Definition (Credible threat): In a coalition structure  (), a coalition has credible

threat if this coalition chooses F when other coalitions choose F.

Condition 2 (Tie-Breaking): If indifferent, a coalition prefers not to opt for a conflict.

4 Analysis

In this section, we illustrate conditions under which different political regimes emerge
in equilibrium.

4.1 Unconstrained democracy

Unconstrained democracy is a case in which the civilian population as a whole rules

and the military plays no role in resource allocation. In other words,  [{A, B}, {G}] is
formed in Stage 1 and in Stage 2, the coalition {A, B} is willing to fight but {G} is not:
 
PG u iG + (1 PG )E Vi D c > u iG ; i = A, B. (C.I)
   
(1 PG ) u iG + PG u G
G c < u G ; i = A, B.
i

Therefore, the coalition {A, B} is strong enough to persuade {G} not to fight. The
payoffs for A and B are:
   
j
E Vi D = vi u ii + v j u i ; j = i = A, B.

Condition I The coalition {A, B} can win uncontested against {G}.

In the coalition structure,  [{i}, { j, G}] , {i} cannot win uncontested against
{ j, G} as both j and G are willing to fight if challenged. The payoffs of { j, G}
versus {i} are:

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Political regimes: a coalition formation approach 247

   
j
Pi u ii + (1 Pi ) u i c; j = i = A, B. (C.II(a))
   
j
Pi u ij + (1 Pi ) u j c > u ij ; j = i = A, B.
   
j
Pi u iG + (1 Pi )  u G c > u iG ; j = i = A, B.

It is necessary that both A and B form a coalition in Stage 2 as opposed to opt

for dictatorship in the coalition formation stage by acting independently. If everyone
fights, the condition becomes (the RHS of the following equation has an expected term
because if i gives up fighting, either j or k can win):
 

j
      P j u i + Pk u ik
j
Pi u i + P j u i + PG u i c >
i G
; i = j = k = A, B, G.
P j + Pk
(C.II(b))

In case one group does not participate, both i and j have incentive to opt for conflict:

Pi   Pj  
j j
u ii + u c > u i ; i = A, B, G, j = i. (C.II(c))
Pi + P j Pi + P j i

Condition II {i} cannot win uncontested against { j, G} or against { j} and {G}

when they do not form a coalition.

   
j Pi
i  Pk
k 
Lemma 2 If Max Pi u ii + (1 Pi )  u i , Pi +P j
u i + Pi +Pk u i c <
K , all conflicts yield lower payoff than K ; j = i = A, B; k = i = A, B, G.

Also, we need the condition that democracy yields higher payoff than opting for
autocracy:
       
j Pi Pk  k 
Max Pi u ii + (1 Pi ) 
ui , u +
i
u c (C.III)
Pi + P j i Pi + Pk i
< E Vi D ; j = i = A, B; k = i = A, B, G.

Condition III Democracy yields higher payoff for both A and B than that of any
regimes in which {i} cannot win uncontested.

We need to ensure that neither A nor B is willing to form a coalition with G either.
A sufficient condition is that the payoffs are less than that of democracy:

j
u j < E V jD ; j = A, B.
 (C.IV(Strong))

Under the civilian-military coalition the payoffs could be higher if the other group
does not contest and the coalition lasts forever. The probability of losing makes the
payoff under democracy lower. However, because the military has to be paid G JA from
tax money, the cost of distortion is greater. As long as the latter effect is stronger,

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248 A. S. Mahmud

democracy is preferred. In short, as long as the probability of winning is sufficiently

high for both A and B while the cost of distortion is relatively high, democracy is the
preferred outcome. This is the case when the coalition { j, G} can win uncontested
against {i}; j = i = A, B. This is the strong condition.
When { j, G} cannot win uncontested against {i}; j = i = A, B, a weaker
condition will suffice:
   
j
E V jD > Pi u ij + (1 Pi ) 
u j c; j = A, B. (C.IV(Weak))

Condition IV Neither A nor B wants to form a coalition with G as democracy has

higher payoff than the coalition structure  [{i}, { j, G}] ; j = i = A, B.

 [{A, B, G}] obtains lower payoff than that of unconstrained democracy (Lemma
1). We can state:

Proposition 1 Unconstrained democracy is established if and only if:

The civil society together can win uncontested against the military.
A(B) cannot win uncontested against others.
Democracy yields higher payoff than any conflict for autocracy.
Alliance with the military yields lower payoff for both A and B than democracy.

Remark 1 Condition IV (Strong) is necessary when { j, G} can win uncontested

against {i}; j = i = A, B. Otherwise Condition IV (Weak) is necessary.

In sum, democracy is established if Conditions IIV are satisfied. The conditions

together are sufficient and separately they are necessary for democracy to exist when
G exists a priori. Violation of any one of them will undermine the democratic process.
Democratic stability exists in a society in which the civil society despite divergent
opinions, prefer not to collude with the military. Different factions of the society trust
each other to continue electoral competition. The civil society should be powerful
enough to resist G when there is predation and G should be weak enough not to
undermine the electoral process.
Let us now explain why each condition is relevant in the context of uncon-
strained democracy. First, unless the civil society as a whole {A, B} can win
uncontested against {G}, there will be no democratic politics under the coalition struc-
ture  [{A, B}, {G}] or under  [{A}, {B}, {G}]. Second, if a certain group of the
civil society can impose autocracy without any contest under the coalition structure
 [{i}, { j, G}], democracy will cease to exist. Hence Condition II needs to be main-
tained.
Third, each civilian group can always opt for autocracy by engaging in a conflict. We
need to ensure that such conflict outcomes yield lower payoff than democracy (Con-
dition III is maintained). Lastly, any alliance with the military can guarantee always
being in power at the cost of sharing revenue with the military. Unless democracy
yields greater payoff for both groups of the civil society, neither will be persuaded to
fight against the military when challenged.

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Political regimes: a coalition formation approach 249

4.2 Civil-military alliance

A civil-military alliance requires a particular group of civil society willing to collude

with G. The benefit of forming an alliance with G is enjoying the benefit of power
without facing the uncertainty of defeat in an election. The cost is the greater cost of
distortion due to the participation of G in sharing power. If the former outweighs the
latter, a civil-military alliance forms. We first discuss the necessary conditions. This
coalition is required to win uncontested in the coalition structure,  [{i}, { j, G}]. In
other words, i does not have the credible threat and { j, G} has the credible threat:
   
j j
Pi u ii + (1 Pi )  ui c <  u i ; j = i = A, B. (C.V(a))
   
j
Pi u ij + (1 Pi ) 
u j c > u ij ; j = i = A, B. (C.V(b))
   
j
Pi u iG + (1 Pi ) u G c > u iG ; j = i = A, B.

Condition V { j, G} can win uncontested against i.

To induce this alliance, we need to rule out any autocratic or democratic regimes.
To rule out any civilian autocracy, we need to satisfy Condition II. In other words, {i}
cannot win uncontested against { j, G} or when j and G are no longer together. It is
required that the alliance yields higher payoff:

Pj   Pk  
j j
uj >
 uj + u kj c; j = A, B; k = j = A, B, G.
P j + Pk P j + Pk
(C. VI(a))

Also, if there is a conflict under the coalition structure  [{A, B}, {G}], we need to
ensure that:
 
j
u j > PG u Gj + (1 PG )E V jD c; i = A, B. (C. VI(b))

Condition VI The alliance { j, G} yields higher payoff than any conflict for autocracy
and democracy.
If G can win uncontested, G will not form an alliance as the payoff is greater than
that of forming an alliance with a civilian group. So, it is necessary that the civil society
fight:
 
PG u iG + (1 PG )E Vi D c > u iG ; i = A, B. (C.VII(a))

When A and B do not form a coalition, the following condition will ensure that G
does not win uncontested:
 

j
      P j u i + Pk u iG
PA u iA + PB u iB + PG u iG c > ; i = j = A, B.
P j + PG
(C.VII(b))

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250 A. S. Mahmud

Condition VII G cannot win uncontested against {A, B} if A and B form a coalition
and when A and B do not form a coalition.

Violation of Condition IV is required to induce either A or B to form a civil-military

alliance when the civil society as a whole can win against the military uncontested or
Condition I is satisfied.
u ii > E Vi D ; i = A, B.

Likewise, when A and B do not form a coalition, G cannot win uncontested (this is
stronger than Condition C.VI(b)):
Grand coalition is less preferable as E Vi D > E ViS . Hence, 
u ii > E Vi D > E ViS .

Proposition 2 If Condition I is not satisfied, a civil-military alliance is established if

and only if:
G cannot win uncontested against the coalition {A, B} and against {A}, {B}.
i =A, B cannot win uncontested against others.
The alliance { j, G} can win uncontested.
The alliance { j, G} yields higher payoff than any conflict for autocracy and democ-
racy.

We begin with the assumption that Condition I is not satisfied or the civil groups
together cannot win uncontested against the military. Let us explain the sufficient part
of the proposition. The sufficient condition implies that Conditions II, V and VI and
VII are maintained.
Condition VII implies that G alone cannot establish autocracy as the civil society as
a whole can contest under the coalition structure:  [{A, B}, {G}]. Since Condition I
is not satisfied as well{A, B} has a conflict with {G}. Therefore, the military needs a
partner. Also, the group in the civil society that forms an alliance with the military alone
cannot establish autocracy (maintaining Condition II). This particular civil-military
coalition needs to win uncontested against excluded group; i.e., the Condition V is
required. Condition VI ensures that the two groups in the civil society prefer this
alliance over any conflicts for autocracy or democracy.
What persuades this alliance? This alliance will be preferred over democracy when
the payoffs are greater. There is always an uncertainty of losing an election while
this alliance ensures the certainty of being in power. Under democracy, however, one
does not share the tax revenue while this alliance will sharing the tax revenue. If the
probability of winning an election is too low and the burden of additional tax revenue
is not too high, alliance with the military yields greater benefits.
Now we turn into explaining why these are necessary conditions. These are neces-
sary because without satisfying them, a civil-military alliance will not emerge. It is
necessary to exclude any possibility of autocracy to establish a civil-military alliance.
These conditions rule out such occurrences. If G can win uncontested against the
coalition {A, B} and against {A}, {B},. a military regime occurs. Therefore, violation
of Condition VII will lead to a military dictatorship. Violation of Condition II will
lead to civilian dictatorship. If Condition VI is no longer valid, each civilian groups
will prefer to fight than opt for this alliance. Finally, without satisfying Condition V,
we have a conflict under the coalition structure:  [{i}, { j, G}].

123
Political regimes: a coalition formation approach 251

Remark 2 If Condition I is valid, a civil-military alliance is established if and only if

Condition IV is violated in addition to the conditions above.

Violation of Condition IV is stronger than what is required to establish a civil-

military alliance when Condition I is not valid. Therefore, the above remark serves as
a sufficient condition as well. It becomes necessary only when Condition I is valid.
Even though the civil society is powerful enough to maintain a credible threat to
G, one segment of civil society finds collusion with G more attractive than continuing
democracy. This particular group has military strength but lacks numerical popularity
to win an election. This violates Condition IV (this is stronger than C.VI(b)).

4.3 Grand coalition (constrained democracy)

Under this coalition structure, everyone compromises, and there is no conflict. Under
this regime:

Both A and B alternate via an electoral mechanism as in unconstrained democracy.

When in power, j, maximizes the joint utility of j and G unlike that of uncon-
strained democracy.

The expected outcome of this coalition are: E ViS ; i = A, B, G. We need the

following condition to arrive at this regime:

Condition VIII E ViS dominates any outcomes for i = A, B, G where each coalition
chooses F.

This condition is valid for all three groups. Conditions III and VI, on the other hand,
were valid for only A and B. However since E ViS < Max {E Vi D ,  u ii }; i = A, B (by
Lemma 1), meeting Condition VIII also implies meeting Conditions III and VI for A
and B.
This is a plausible outcome when no coalition structure has an uncontested winner.
The reason being if any coalition can win uncontested against others, the payoff is
greater. Hence, the grand alliance  [{A, B, G}] is formed only when other coali-
tion structures yield conflict. Neither the coalition {A, B} nor {G} can win the war
uncontested as both have incentive to fight (Condition I is violated):
   
PG u iG + (1 PG )E Vi D c > u iG ; i = A, B.
     
PG u G
G + (1 PG ) u i
G c > u iG ; i = A, B.

When the outcome of this war is dominated by the payoffs of the grand coalition,
semi-consolidated democracy arise. The grand coalition with G,  [{A, G, B}] is a
better option for both {A, B} and {G} as violence is avoided and the grand alliance
yields greater payoff:

123
252 A. S. Mahmud

 
PG u iG + (1 PG )E Vi D c < E ViS ; i = A, B. (C.VIII(a))
   
PG u G
G + (1 PG ) u iG c < E VGS ; i = A, B.

The alternative of forming a civil-military alliance with G is not preferable to either A

or B than constrained democracy since no coalition can win uncontested (Condition V
is violated). The payoffs of { j, G} versus {i} are:
   
j
Pi u ii + (1 Pi ) 
u i c < E ViS ; j = i = A, B. (C.VIII(b))
   
j
Pi u ij + (1 Pi ) 
u j c < E V jS ; j = i = A, B. (C.VIII(c))
   
j
Pi u iG + (1 Pi ) u G c < E VGS ; j = i = A, B.

Under the coalition structure  [{A}, {B}, {G}], the maximum payoff (satisfying Con-
dition II) by Lemma 2 is as follows:

Pi   Pk  k 
u ii + u c; k = i = A, B, G.
Pi + P j Pi + Pk i

Fighting for autocracy by each group also yields lower payoff:

Pi   Pk  k 
u ii + u c < E ViS ; i = A, B, G. (C.VIII(d))
Pi + P j Pi + Pk i

Proposition 3 The grand alliance is established if and only if:

There is no uncontested winner under any coalition structure.
The payoff from the grand alliance dominates all conflict outcomes.

Constrained democracy emerges as a compromise among all concerned parties as no

other coalition structure can produce a winner without conflict. No uncontested winner
under any coalition structure implies violation of Conditions I and V and Condition II
is valid. Therefore, unless a grand coalition {A, B, G} forms, a conflict in inevitable
in Stage 2. Thus, a conflict can only be averted if the payoff of this grand alliance
outweighs that of the conflict regimes (Condition VIII).
We have so far discussed the sufficient part. Why is it necessary? In all political regimes
(where no conflict occurs), as a part of the ruling cabal, A and B obtain the lowest under
the grand coalition. Therefore, to induce everyone to arrive at this coalition structure,
all other coalition structures must yield conflict. In addition, conflict outcomes should
be lower than that of the grand alliance.

4.4 Military regime

To arrive at a military regime, G needs to be strong enough to challenge and both

groups too weak to resist; i.e., Conditions I and VII are violated. We maintain the

123
Political regimes: a coalition formation approach 253

assumption that electoral competition can be continued when G does not exist. As a
coalition {A, B} chooses not to fight while G chooses to fight:
 
PG u iG + (1 PG )E Vi D c < u iG ; i = A, B.
   
(1 PG ) u iG + PG u G
G c > u G ; i = A, B.
i

G > Max [ u GA , 
G prefers no coalition with either A nor B since u G B ]. The grand
uG
coalition  [{A, B, G}] is also not preferable since the grand coalition yields a convex
payoff of [u GA , B ] and G is worse off.
uG
If A and B do not form a coalition, we require the military to win uncontested under
the coalition structure  [{A}, {B}, {G}].

4.5 Civilian dictatorship

When one civil group is very strong compared with others or Condition II is violated, a
civilian dictatorship will emerge. Civilian dictatorship by {i} occurs when the coalition
{ j, G} do not have any credible threat under the coalition structure  [{i}, { j, G}]:
   
j
Pi u ij + (1 Pi ) 
u j c < u ij ; j = i = A, B.
   
j
Pi u iG + (1 Pi ) u G c < u iG ; j = i = A, B.

While group {i} have credible threat:

   
j j
Pi u ii + (1 Pi ) 
ui c > 
u i ; j = i = A, B.

i prefers this outcome over over the grand alliance and unconstrained democracy since
u ii > E Vi D > E ViS . This is the case when j and G together do not have any credible
threat.
In the scenario when j and G do not form a coalition, we need i to win uncontested
in the coalition structure  [{i}, { j}, {G}]. We can summarize our previous analysis
as:

Proposition 4 (i) The military regime is established if and only if G can win uncon-
tested against others. (ii) The civilian autocracy is established if and only if i can win
uncontested against others.

Military regime occurs when the military remains unchallenged. Similarly, to establish
civilian dictatorship, we require a civilian group to win uncontested against the rest of
the society. Upholding the legitimacy of an election requires equally dispersed combat
ability among different factions of civil society. Otherwise, one particular faction will
claim dictatorship by sheer brute force. Places, where democracy was established very
early, had a civil society composed of multiple, equally powerful groups.

123
254 A. S. Mahmud

5 Comparative statics

We illustrate different political regimes graphically. Suppose the probability of winning

an election is .5 for each group. The vertical and horizontal axis describe the combative
ability of each group to win a conflict. The equation PA + PB = 1 PG reflects the
power of the civil society. Fixing a certain value of PG leads to iso-civil power graphs.
Lower value of PG leads to higher value of PA + PB . Within this parametric space,
we define the threshold values of P i , P G , P i and P G .

Definition (P i and P G ): P i (P G ) is the threshold value such that { j, G(i)} can win
uncontested against {i(G)} under the coalition structure  [{ j, G(i)}, {i(G)}] ; i =
j = A, B.
c c
Pi =  ; PG =
. (P i(G) )
u ii 
ui
j uG
G u iG

P i (P G ) defines the necessary condition for a regime formed by the coalition { j, G(i)}.
This is not sufficient since it is possible for either j or G(i) to opt for autocracy.
Therefore, an additional threshold value is required to determine whether a particular
group wins uncontested against the rest regardless of the coalition formation. This is
as follows:
 
Definition (P i and P G ): P i P G is the threshold value such that {i} can win uncon-
tested the coalition structures  [{i (G))}, { j, G (i)}] and  [{i}, { j}, {G}] ; i =
j = A, B.
  
P i P G = P i(G) ({ j, G(i)}) , P i(G) ({ j}, {G(i)}) , P i(G) ({G(i)}) , P i(G) ({ j}) .

In this section, we assume Condition VIII to hold : E ViS weakly dominates any out-
comes for i = A, B, G where each coalition chooses F.3 We discuss two cases:
j
u j > E V jD . Higher civil power leads to more likely event that
In the first case, we hold 
the military is not in power. If either A or B has excessive power, a civilian dictatorship
occurs or a coalition is formed with G. The military regime occurs when P G PG .
The civilian autocracy occurs when  P i  Pi ; i = A, B. Unconstrained democracy
is established if and only if Pi P i , P i and PG P G . A civil-military alliance
{ j, G} is established if and only if P j < P j , Pi P i and PG P G . The grand
alliance is established if and only if PG (P G , P G ) and Pi (P i , P i )
j
In the second case, we hold  u j < E V jD ; i.e., the option of forming an alliance with G
yields lower payoff than that of democracy. Unconstrained democracy is established
if Pi < P i , PG P G A civil-military alliance { j, G} is established if and only if
PG (P G , P G ), P j < P j and Pi P i . As a consequence democracy is a more
likely event while a civil-military alliance is a less likely one as can be seen in the
diagram.

3 discussed in details in the previous section.

123
Political regimes: a coalition formation approach 255

j
We assume  u ii > u i to ensure the possibility that the alliance with G yields higher
j j
payoff than that of the unconstrained democracy. Therefore, u ii >  u ii > u i > 
ui .

5.1 Preferences

j
If the two groups of the civil society are similar in preferences, then u ii and u i will be
closer to each other.

Lemma (Preferences): (a) Similarity in preferences induces coalition formation

between two civil groups. (b) Increase in u i has no impact on P G , P i and Pji <
j
u i
P G ({i, j}) j
0, j > 0. (c) Increase in 
ui decreases P i .
u i

For Part (a), the reasoning is as follows. The expected value of being a loser in an
election under democracy increases. Hence when the military challenges, it becomes
more probable for the threshold value P G ({i, j}) to be binding or the civil society to
form a coalition.
There are two opposing effects on the threshold values described in Part (b).
j
u i describes how similar or different these groups are. If coalitions are formed when
other groups are challenged by G, the threshold level P G for military regime increases.
In other words, the military regimes become less probable. On the other hand, when
a civilian group {i} challenges the rest of the society, the other group { j} is also less
likely to challenge since being in power yields less additional benefit. Increase in
j
u i will increase the value of E Vi D ; i = A, B. Therefore, it is possible to shift from
j j
u j > E V jD towards 
 u j < E V jD . As shown in the two figures, this will dissuade
civil-military alliances.
j
The same argument leads to  u ii being closer to 
u i ; that is, the prevalence of a
civil-military alliance increases as the excluded region is better off.

Proposition 5 If A and B have similar preferences

(a) The prevalence of the military regime declines and that of the civilian autocracy
increases.
(b) The impact on other regimes is ambiguous.

The prevalence of military regimes will decline as long as the civil society more likely
to unite against the military and the threshold value for such an event declines since
the democracy yields higher value for both groups. Since the groups are similar to
each other in preferences, the difference between being and not being in power is less.
Hence, the prevalence of civilian dictatorship increases.
The value of democracy E Vi D increases as the losing party obtains higher benefits.
However, increased probability of civilian autocracy and that of civil-military alliances
can undermine this gain. The possibility of collusion between the military and that
of a civilian group has an ambiguous impact. On one hand, the value of democracy
increases; this induces democratization. On the other hand since both groups are
similar, the excluded group suffers less from the collusion. The decline in military

123
256 A. S. Mahmud

regime increases the possibility of the grand alliance. However, higher benefit of
civilian autocracy and civil-military alliance diminishes its prospect.

5.2 Scale in fighting

Lemma (Scale): Increase in 1 (a) encourages coalition formation between two

groups and (b) increases the threshold values P G , P i , and P G ({i, j}) , P i ({G, j}).
There are no further impacts.

Therefore, the threshold values P G ({i, j}) , P i ({G, j}) are more likely to bind.
Also, the scale effect reduces the possibility of autocracies since the benefit of forming
a coalition increases.

1
Proposition 6 If increases

(a) The prevalence of the military regime and that of the civilian declines.
(b) The impact on other regimes is ambiguous.

The prevalence of military regimes declines; that is, the civil society as a whole has
greater incentive to stand unitedly against the military. The same argument leads to
decline in the prevalence of civilian dictatorship. Scale effects lead to the probability
of joint coalition formation such as {A, B}, {G, A} or {G, B}.
Increase in P G induces democratization whereas that of P i encourages civil-
military collusion. The reverse is true for the civil-military alliance: an increase
in P G discourages such an alliance while that of P i encourages it. If the range
PG (P G , P G ) and Pi (P i , P i ); i = A, B shrinks, the prevalence of the grand
alliance declines. On the one hand increase in P G , P i discourages the grand alliance
and on the other hand since the increase in P G ({i, j}) , P i ({G, j}) encourages.
Therefore, the result is ambiguous.

5.3 Winning an election

What happens when the probability of winning an election changes? Only variable
that is affected is E Vi D . Because of symmetry, P G ({i, j}) is not affected.

Lemma (Election): Increase in v has no impact on P G , P i , P i and P G .

The probability of winning an election by party i is vi = v and v j = 1 v. The

following analysis assumes at v = .5, E Vi D > 
u ii . An alliance with G yields greater
(lower) payoff than democracy for i if:

j
ui ui
E Vi D > (<) 
u ii v > (<) v = i .
j
u ii u i

123
Political regimes: a coalition formation approach 257

For j, the corresponding probability is as follows:

j
u j u ij
E V jD > (<) 
u ii v < (>) v =  .
j
u j u ij


Unconstrained democracy occurs when both groups prefer election or
v v,  v and
the military does not have any credible threat: PG P G . If v / v, v , uncon-
strained democracy is established when a civil-military alliance faces resistance:
Pi > P i , otherwise not.
The civil-military alliance obtains higher payoff
when the probability of win-
ning an election is very low for one group or v / v, v . This payoff is realized
when the coalition can win
uncontested
 against the excluded group P i P i and
PG < P G . Under v v, v , a civil-military alliance is realized if the coalition
{A, B} faces credible threat from G : PG > P G , otherwise unconstrained democ-
racy is not established.

Proposition 7 Suppose at v =.5, E Vi D > 

u ii :
(a) A change in v has no impact on the prevalence of the military regime, civilian
autocracy and the grand alliance.

(b)
The prevalence
 of unconstrained democracy increases when v v, v . If v /
v, v , we witness an increase in the prevalence of a civil-military alliance.

5.4 Public consumption

Suppose the citizens value private consumption more and the cost of the public con-
sumption thus increases. This increase is identified by an increase in :
   
Ui gi , g j W gi + g j .

Since this change has no impact on maximum extractable tax revenue, u G G remains
constant. The effect of the increased cost of public expenditure differs across political
regimes when the level of public consumption is also different. Hence, we study the
more interesting scenario that satisfies the following inequality:

j
G > g Jj + G Jj > g j

We obtain the following lemma:

Lemma (Public Consumption): As increases: (a) G will be less willing to form a

coalition { j, G}.
P
(b) i >< 0, PG
= 0, P i ({j, G}) < 0 and P i ({
j}, {G})
> 0.

Part (a): Under joint maximization, the increased cost of public consumption is
taken into account by the coalition partner. That is not the case when the military

123
258 A. S. Mahmud

regime exists since the military regime is not affected by increased cost of public
j j
consumption. Hence, the payoff  u G declines while u G G , u G ; j = A, B remain
constant; therefore, the military is less willing to form a coalition with j.
Part (b): The threshold to maintain credible threat against {i} may or may not
P
increase since i is indeterminate. It is clear from the above lemma that the prevalence
of military dictatorship declines as the cost of providing public consumption increases.
The prevalence of civilian autocracy has an ambiguous impact. If the coalition { j, G} is
formed, the threshold level decreases as this coalition yields less benefit. If, however,
both j and G are not in a coalition, the threshold level increases. The reason for the
latter is as follows. When everyone fights against each other, the emergence of military
dictatorships is a possibility which is costly to the civilian groups. Hence, the civilian
groups are more willing to fight. In sum,
Proposition 8 An increase in the cost of public consumption reduces the prevalence
of the military regime. The effect on other regimes is ambiguous.
Increased cost of public consumption leads to a decrease in benefit for the civil
groups under the military regime since the military consumption of tax revenue does
not add any benefits to the civil society. Therefore, the military will face retaliation
when it challenges the civil society.
The effect on civilian autocracy depends on whether the threshold level P i ({ j, G})
or P i ({ j}, {G}) is binding. If P i ({ j, G}) is binding, the prevalence of a civilian
autocracy increases. If P i ({ j}, {G}) is binding, the opposite occurs. There is no effect
when either j or G fights alone.
The impact on unconstrained democracy is ambiguous since it depends on the
P
prevalence of civilian autocracies as described previously. In addition, if i < 0, the
prevalence of democracy increases, whereas otherwise, it declines.
There are two effects on the emergence of a civil-military alliance. The coalition
{ j, G} is less likely to emerge as a threat against {i} as P i ({ j, G}) declines. When
Pi
< 0, this effect is reinforced and the prevalence of a civil-military alliance declines
P
unambiguously. If however, i > 0, there are two opposing effects and the result is
ambiguous.
The grand alliance emerges when PG (P G , P G ) and Pi (P i , P i ); i =
A, B. This becomes less likely if P i declines and P i ({ j}, {G}) is binding. When
P i increases and P i ({ j, G}) is binding, the reverse is true. Otherwise, the impact
depends on the relative strength of the opposing forces.

6 Discussion

Unlike Western countries, most developing nations had remnants of their colonial past
following independence. Therefore, the civil-military relations varied from nation to
nation. Huntington (1968) asserts that India could develop a stable democratic regime
after 1947 due to the strong political organization of the Congress Party. The Congress
group effectively resisted the transgressions of the military.
In several other cases, the military establishment itself has been so strong that
the civil society collectively was unable to contain the threat. As opposed to India,

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Political regimes: a coalition formation approach 259

Pakistan did not begin with a strong political organization. The Muslim League of
Pakistan did not possess the same strength to effectively undermine the power of the
military. The Muslim League was comprised of the landowner class from the regions
of India and had little contact with the masses of either West Pakistan or East Pakistan
(now Bangladesh) while the Congress had mass support. In the present context, G is
strong in Pakistan vis--vis political organizations. In India, the organizational strength
of political groups is greater and the contest between G and others (A, B) is far less
uneven (the strength of G is measured in terms of the probability of winning a civil
war). Frequent military intervention, in contrast, has been the norm in Pakistan during
its history since independence.
Costa Rica alone in Latin America was able to abolish its armed forces in 1949.
This led to the supremacy of civilian rule (Rouquie and Suffern 1995). Weak military
establishment in Colombia enabled the formation of political parties as primary actors.
When the army intended to overthrow a civilian government in the 1850s, an armed
coalition of liberals and conservatives effectively thwarted the challenge. Civilian
rule was broken in 1953 when General Rojas claimed dictatorship during a period of
intense inter-party conflict known as la violencia. The main parties were unable to
resolve their conflicts and a credible threat no longer existed. Extensive pacts between
the two parties rejuvenated a credible opposition to the military regime and democracy
returned in 1958 (Hartlyn and Dugas 1999). In Bangladesh, the military regime led by
General Hussein Muhammad Ershad from 1982 to 1990 persisted until the two main
political parties united in opposition (Milam 2009).
The military is not the only source of power that can undermine competitive politics.
A very strong political party can achieve the same end as well. In communist Russia
and China, political leaders were able to form a formidable political organization
(Huntington 1968) and impose dictatorship. Huntington (1968) comments: For Lenin
ultimate loyalty belongs to the family, the clan, the tribe, the nation, or even the class:
it belongs to the group. This example was replicated in China as well. In sum, China
and Russia had such powerful communist groups that there was virtually no effective
contest. This culminated in group dictatorship in those nations. In contrast, in England
the landowning class was challenged by the rising commercial class. In the United
States, the industrializing North and the plantation economy based South were bitter
rivals but neither could dominate the other.
To ensure democracy, civil society needs to be strong enough to challenge the mili-
tary and military needs to depoliticize to ensure democratic stability. Opinions may
differ among different factions within civil society but electoral competition and its
subsequent continuation require that all the groups come to agree on the democratic
process of free and fair elections. When coercive elements of society are concentrated
and socioeconomic opportunities are not diffused, hegemonic regimes are most likely
to arise.
England is a classic example where the power of the monarch (G) was checked by
two different groups (A and B). By the end of seventeenth century, two clearly defined
groups with opposing interests emerged in Englandthe Tories and Whigs. Tories
represented the old landowning class while Whigs represented the newly emerging
commercial one. Initially, Tories were supportive of the monarch. When James II
transgressed the rights of Tories, both Whigs and Tories agreed that, despite their

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260 A. S. Mahmud

differences, it was in their mutual interest to prevent such violations of rights by the
monarch.
A similar incident arose in colonial America as well. The first English colony
in North America was established in 1607. By 1733, this number had grown to 13
colonies. Geographical differences between the Northern states and the Southern ones
caused these regions to progress differently. The difference was sharp between the
free economy of the North and the slave economy of the South. Despite their widely
different outlooks, all of them agreed that the role of the center should be curtailed to
give regions a free hand. According to Weingast (1995), this attitude provided the
political foundations for the preservation of a slave economy in the South, a free one
in the North (A & B) and a limited government (G).
Regimes are often formed on the basis of a partnership between a segment of the civil
society and the armed forces. This can occur due to ideological reasons as well as
material interests. In England, prior to constitutional monarchy, the monarch could
afford to violate the rights of Whigs (the commercial class) because Tories (the landed
elite) were not opposed to such transgressions. As soon as James II betrayed the Tories,
however, this arrangement broke down (Weingast 1995).
In contrast to England, the feudal class in Germany never opposed the monarch.
Instead, they colluded, thus preventing a democratic revolution. Feudal lords needed
the monarch to sustain labor-repressive agricultural practices (Moore 1966). Their
shared interests created a nexus between the two. The German commercial and indus-
trial interests were politically not strong enough to be an independent force. As
Downing (1998) puts it: [In Germany] the state relied heavily on the nobility and
allowed a measure of local control as long as control over taxation and the army was
in its hands. Absolutism was never absolute. This is a case where the collusion with
G is profitable to particular group preempts democratic prospects.
Historical research on Latin America, Central America and Southern Europe reveals
how the threat of social rebellion creates incentive for the landed gentry or the bour-
geoisie to form an alliance with the military (ODonnell 1973; Stepan 1988; Drake
1996; Paige 1997).
Venezuela was the least democratic country in Latin America before 1958 but after
1958, it became one of the few successful democracies of the region. Troubled years
between 1945 and 1958 led all groups of the civil society and the military come to
consensus about the democratic system. The emergence of oil revenue also eased the
conflict among various groups. Even though, political parties ruled afterwards and
alternated power, the military remained an important force in the political arena. In
fact, complete independence of the military in the case of Venezuela implied that the
civilian government had little or no oversight about how taxpayers money was spent
on the armies. The military also participated many of the social activities. Therefore,
instead of complete civilian control of the armed forces (as happened in Mexico or
Costa Rica), the case of Venezuela can best be characterized as relatively peaceful
coexistence akin to formation of grand alliance in our theoretical framework (see
Rouquie and Suffern 1995; Norden 1998).

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Political regimes: a coalition formation approach 261

7 Conclusion

Valenzuela (1999) articulated the anatomy of a democratic equilibrium in the following

words:
In the final analysis, however, democracy involves human choice by compet-
ing groups and leaders who must determine whether peaceful mechanisms for
the resolution of conflict, based on the concept of popular sovereignty, provide
them with the best possible guarantees under the circumstances. More often
than not, this choice may stem from an inconclusive struggle for power, a situ-
ation of stalemate where there are no clear winners. That being so, democracy
can be understood as resulting from asset of compromisessecond preference
choicesin which the concurrence of non-democrats may be as important as the
support of democrats. Once democracy is structured, it provides the key rules of
the game, defining the parameters for action and the strategies to be pursued by
relevant actors.
In our context, the relevant actors are the two civil society groups and the national
armed forces. Whether or not players will undermine the democratic process depends
on the subsequent game played. We argue that democracy is likely to be established
in societies where the civil society, despite deep internal schisms, is willing and able
to prevent the transgression of their rights by the military. When the military is too
strong compared to the civil society, an absolutist state is established. If a certain
segment of civil society gives its allegiance to the armed forces, a different kind
of dictatorial regime emerges with civil-military collaboration. When a particular
political organization is too strong vis--vis others (including the military), one-group
dictatorship becomes the outcome.
When no coalition can win uncontested against others, it is possible to form a grand
alliance where both civil groups and the military share power. When all else fails or
the pay off from this grand alliance is not sufficient, groups engage in a conflict where
the winner of this conflict emerges as the winning coalition
In a state of democratic equilibrium, the armed forces accept the supremacy of
civilian rule while two different factions of civil society accept the electoral verdict
and continue participating in the democratic process. This is possible only when the
military is effectively restrained by the civil society as a whole; civil society is united
in this challenge only when both groups are employing a non-myopic strategy. This
is a knife-edge situation that cannot be guaranteed to endure unless there is some
uniformity in distribution of power across involved groups. Any imbalance in power
will disrupt democratic stability.

Appendix

Proof of Lemma 1
j
For the part (a): There are three inequalities. For the first inequality since g j G:
       
j j j
u j = U j g j , 0 W g j U j g j = G, 0 W G > U j (0, 0)W G = u Gj .

123
262 A. S. Mahmud

For the coalition { j, G} :

   
Max U j g j , gi + UG (G) W gi + g j + G
 
U j UG W gj + G j
= = g j = g Jj , g j = 0, G = G Jj ; j = i = A, B.
g j G g j

U j W (g j +G j )
W (g j ) j
Since g j = g j >
g j , g j < g j .
J

j
Also, it can be shown that g Jj + G Jj > g j since both utility functions are concave.
Consider, the share of expenditure on g j is and that of G is (1 ). The value of
(0, 1) is determined from the FOC describing the allocation between g j and G for
a given T. Differentiating with respect to T leads to:

U j UG W U j W j
+ (1 ) > T J = g Jj + G Jj > g j = T j .
T T T T T
Hence, the second inequality:
 
j j j
u j > U j g j , 0 W g Jj + G Jj > 
u j.

For the third inequality:

    
j

u j = U j g Jj , 0 W g Jj + G Jj U j g Jj , 0 W G
 
> U j (0, 0) W G = u Gj .

j j
Part (b) can also be shown since u j > 
u j:
   
j j
E V jS = v j 
u j + (1 v j ) 
u i < E V jD ; f or j = i = A, B.

E VGS > E VGD because G obtains some tax revenue under the grand alliance. Because
 
of symmetry in Ui gi , g j , G JA = G BJ . Therefore, E VGS = 
u GA = B
uG

Proof of Proposition 1

Sufficient condition

Conditions I- IV are valid. Under the coalition structure  [{A, B}, {G}], the payoffs
of A and B because of Condition I are:
   
j
E Vi D = vi u ii + v j u i ; j = i = A, B.

In the coalition structure,  [{i}, { j, G}] , i is opting for autocracy. The maximum
payoff i = A, B can obtain (by Condition II neither A nor B can win uncontested in

123
Political regimes: a coalition formation approach 263

their attempt to autocracy) is:

   
j
Pi u ii + (1 Pi ) 
u i c; j = i = A, B.

By Condition III this is lower than that of democratic payoff:

   
j
Pi u ii + (1 Pi ) 
u i c < E Vi D ; j = i = A, B.

j
The maximum possible payoff of j joining G is:  u j . By Condition IV (Strong and
Weak), this is lower than that of democratic payoff:
   
j j
Pi u ij + (1 Pi ) 
uj c <
u j < E V jD ; j = A, B.

Under the coalition structure  [{A}, {B}, {G}], neither A nor B can win uncontested
(by Condition II). Condition III states that Democracy yields higher payoff for both
A and B than that of any regimes where it cannot win uncontested. By Lemma 2, this
implies:
       
j Pi Pk  k 
Max Pi u ij + (1 Pi ) 
uj , u ii + ui c
Pi + P j Pi + Pk
< E Vi D ; j = i = A, B; k = i = A, B, G.

If the grand coalition  [{A, B, G}] forms, the payoffs of A and B are lower (by
Lemma 1):
E ViS < E Vi D ; i = A, B.

Therefore, the coalition structure  [{A, B}, {G}] yields the highest payoff for both
A and B. Both can win uncontested against G and they are willing to fight while G
decides not to do so.

Necessary condition

Why these are necessary conditions has been discussed in the main text. Hence, we
omit the proof.

Proof of Proposition 2

Sufficient condition

Under the coalition structure  [{A, B}, {G}] , the payoffs of A, B and G because of
Condition I are:
E V AD , E VBD , E VGD = UG (0).

123
264 A. S. Mahmud

In the coalition structure,  [{i}, { j, G}] , the payoff of B because of Condition V is

j

u j . In the coalition structure,  [{i}, { j, G}] , the payoff of j because of Condition V
j
is 
u j.
Under the coalition structure  [{A} , {B}, {G}], neither A nor B can win uncon-
tested (by Condition II). The maximum possible payoff (by Lemma 2) is lower than
that of alliance (by Condition VI):

Pi   Pj  
j
u ii + u c <
u ii ; i = A, B, j = i.
Pi + P j Pi + P j i

If the grand coalition  [{A, B, G}] is formed, the payoff of A is lower by Lemma 1:
E V AS < E V AD .
If one civil group j has higher payoff than democracy (Condition IV is violated)
j
or E V jD < u j , the coalition structure  [{i}, { j, G}] is formed in Stage 1. By Condi-
tion V, { j, G} wins uncontested against {i}.

Necessary condition

If Condition II is not satisfied, either A or B will become the dictator and we arrive at
the civilian autocracy and as a group one is better off. If Condition V is not satisfied,
there is conflict (since Condition II rules out civilian autocracy). Therefore without
satisfying these conditions, we cannot induce G and a group from the civilian society
to collude and rule.
We can also illustrate a case where the sufficient condition is not binding. Suppose
the coalition structure  [{A, B}, {G}] yields conflict (violation of Condition I). The
expected payoffs from the coalition structure  [{A, B}, {G}]:
 
PG u Gj + (1 PG )E V jD c > u Gj ; j = A, B.

Therefore, when Condition IV is valid, an alliance with G can occur whenit yields
higher payoff:
 
j
u j > PG u Gj + (1 PG )E V jD c; j = A, B.
E V jD > 

Proof of Proposition 3

Sufficient condition

When no coalition can win uncontested the payoffs are as follows. The expected
payoffs from the coalition structure  [{A, B}, {G}] or violation of Condition I:
 
PG u iG + (1 PG )E Vi D c; i = A, B.
   
PG u G
G + (1 PG u G c; i = A, B.
) i

123
Political regimes: a coalition formation approach 265

The alternative of forming a civil military alliance with G or the coalition structure
 [{A}, {B, G}] or  [{A, G}, {B}] leads to (Condition V is violated) leads to a war.
The payoffs of { j, G} versus {i} are:

   
j
Pi u ii + (1 Pi ) u i c; j = i = A, B.
   
j
Pi u ij + (1 Pi ) u j c; j = i = A, B.
   
j
Pi u iG + (1 Pi )  u G c; j = i = A, B.

Under the coalition structure  [{A}, {B}, {G}], the conflict across the groups leads
to the maximum payoff (satisfying Condition II) by Lemma 2:

Pi   Pk  k 
u ii + u c; k = i = A, B, G.
Pi + P j Pi + Pk i

Under the grand coalition  [{A, B, G}], there is no conflict and the payoffs are:

E V AS , E VBS , E VGS

As long as the payoff of the grand coalition is higher than that of the conflict outcomes,
the grand coalition is formed in Stage 1.

Necessary condition

Note that
 
u ii < u ii ; i = A, B.
E ViS < Max E Vi D , 
E VGS = 
u GA = B
uG < uG
G

The above equations lead to the conclusion:

Under democracy, both A and B are better off than the grand alliance.
Under civil-military alliance the civil faction is better off, and the military is
indifferent between this particular alliance and that of the grand coalition.
Under autocracies, everyone is better off than the grand coalition.

Therefore, if any other coalition structure yields an outcome with an uncontested

winner, the grand alliance yields lower payoff for the winning coalition. Hence, the
grand alliance is only preferable by all parties when all other coalition structure lead
to no uncontested winner and the grand alliance yields conflict outcomes.

123
266 A. S. Mahmud

Proof of Proposition 4(i)

Sufficient condition

Under the coalition structure  [{A, B}, {G}] , the payoff G is: u GG because G can win
uncontested.
Under the coalition structure  [{A} , {B}, {G}], the payoff of G is: u G G because G
can win uncontested.
j
uG < uG
In the coalition structure,  [{i}, { j, G}] , the maximum payoff of G is  G . If
the grand coalition  [{A, B, G}] forms, the payoff of G is lower as it is a convex
combination of  u GA and B . Therefore, G prefers not to form any alliances.
uG
Therefore, the military regime is established.

Necessary condition

If these conditions are not satisfied, then {G} will not be able to win uncontested
under the coalition structures  [{A, B}, {G}] and  [{A}, {B}, {G}]. Hence, these
are necessary conditions.

Proof of Proposition 4(ii)

Sufficient condition

Condition II is violated - suppose A can win uncontested against {B, G}.

Under the coalition structure  [{A, B}, {G}] , the maximum possible payoff for
A is: E V AD < u AA
Under the coalition structure  [{A} , {B}, {G}], the payoff of A is: u AA because A
can win uncontested. This is the second case.
In the coalition structure,  [{A}, {B, G}] , the payoff of A is u AA .
In the coalition structure,  [{B}, {A, G}] , the payoff of A is  u AA < u AA . If the
grand coalition  [{A, B, G}] forms, the payoff of A is lower by Lemma 1: E V AS <
E V AD < u AA . So, A prefers not to form any alliances.
Therefore, a civilian autocracy is established.

Necessary condition

If these conditions are not satisfied, then {A} will not be able to win uncontested
under the coalition structures  [{A}, {B, G}] and  [{A}, {B}, {G}]. Hence, these
are necessary conditions.

Threshold values

Now we define the circumstances under which a particular threshold value is effective.
Under the coalition structure  [{i (G))}, { j, G (i)}], only P i ({ j, G(i)}) is binding:

123
Political regimes: a coalition formation approach 267

1 2c
P i ({ j, G}) =  ;
 j
uj +
j
u G u ij u iG
1 2c
P G ({i, j}) =  . (P i(G) { j, G(i)})
E V D + E V D uG uG
i j i j

If {i(G)} challenges, there could be four possible situation under the coalition structure
 [{i}, { j}, {G}]:
Suppose {i} challenges j and G. The question is under what conditions:
1. { j, G} will be formed
2. { j}, {G} will remain separate
3. Only {G} will fight
4. Only { j} will fight
In the coalition structure,  [{i}, { j, G}] , if {i} challenges, the payoffs of
{ j, G} are:
   
j
Pi u ij + (1 Pi ) 
u j c; j = i = A, B.
   
j
Pi u iG + (1 Pi ) u G c; j = i = A, B.

Case 1: Suppose the payoff is such that everyone finds it optimal to fight under
 [{i}, { j}, {G}]:
   
      Pi u ij + PG u Gj
j
Pi u ij + P j u j + PG u Gj c > ; i = j = G = A, B, G.
P j + PG

{ j, G} is formed if:
   
j
Pi u ij + (1 Pi )  uj
     
j
Pi u ii + P j u i + PG u iG
   
j
Pi u iG + (1 Pi )  uG
     
j
Pi u iG + P j u G + PG u G G ; j  = i = A, B. (Case 1 : P({j, G}))

If either of the Case 1: P({j , G}) conditions does not hold, { j, G} is not formed and
P i ({ j}, {k}) is binding.

1  j

P i ({ j}, {G}) = 1 + c P j u j PG u G
j ;
u ij
1  j
4
P G ({i}, { j}) = 1 + G c P j u j Pi u ij . (P i(G) ({ j}, {G(i)}))
uj

123
268 A. S. Mahmud

Case 2: In case neither G and j have incentive to opt for conflict:4

     
j
Pi u ij + P j u j + PG u Gj c u ij ; i = j = G = A, B, G.

{ j, G} is preferable if:
   
j
Pi u ij + (1 Pi ) u j c u ij
   
j
Pi u iG + (1 Pi ) u G c u iG ; j = i = A, B. (Case 2 : P({j, G}))

If either of the Case 2: P({j , G}) conditions does not hold, { j, G} is not formed and
there is no conflict.
Case 3: Suppose j does not intend to participate and G does under the coalition
structure  [{A}, {B}, {G}]:
   
      Pi u ij + PG u Gj
j
Pi u ij + P j u j + PG u Gj c ; i = j = A, B.
Pi + PG
Pi   PG  G 
u iG + u c > u iG ; i = j = A, B.
Pi + PG Pi + PG G

Even now the coalition may be beneficial for both j and G if under the coalition
structure  [{A}, {B}, {G}]:
   
j
Pi u iG + (1 Pi )  uG
Pi   PG  G 
u iG + uG
P +P P +P
 i G i  G
j
Pi u ij + (1 Pi ) uj c
   
Pi u ij + PG u Gj
; j = i = A, B. (Case 3 : P({j, G}))
Pi + PG

If either of the Case 3: P({j , G}) conditions does not hold, { j, G} is not formed and
P i ({G}) is binding.

PG  G 
P i ({G}) = u G u iG c ;
c
Pi  i 
P G ({i}) = u i u iG c . (P i(G) ({G(i)}))
c

4 The calculation is carried out for group j. The corresponding calculations can be done for G(i) as well.

123
Political regimes: a coalition formation approach 269

Case 4: Suppose G does not intend to participate and j does:

     


j Pi u iG + PG u G G
Pi + P j u G + PG u G c
u iG G
; i = j = A, B.
P j + PG
Pi   Pj  
j
u ij + u j c > u ij ; i = j = A, B.
Pi + P j Pi + P j

For both j and G, the coalition is beneficial if:

    Pi   Pj  
j j
Pi u ij + (1 Pi ) 
uj u ij + uj
Pi + P j Pi + P j
   
    Pi u iG + PG u G G
i j
Pi u G + (1 Pi ) 
uG c ; i  = j = A, B. (Case 4 : P({j, G}))
P j + PG

If either of the Case 3: P({j , G}) does not hold, { j, G} is not formed and P i ({ j}) is
binding.

Pj  j  Pj  j 
P i ({ j}) = u j u ij c ; P G ({ j}) = u j u Gj c . (P i(G) ({ j}))
c c

j
Proof of Lemma (Preferences): (a) When u i increases, the expected payoff from
the democratic outcome E Vi D ; i = A, B increases. Therefore, if G challenges, the
benefit of forming {A, B} increases. The results of parts (b) and (c) can be derived
j j
from differentiating threshold values respectively by u i and 
ui .

Proof of Lemma (Election): This can be derived from differentiating threshold values
with respect to v.

Proof of Lemma (Scale): (a) When 1 increases, the probability winning for the coali-
tion { j, G(i)} (1 Pi(G) ) increases. Therefore, the benefit of forming a coalition
is greater. (b) can be derived from differentiating threshold values with respect to .

j
Proof of Lemma (Public consumption): G > g Jj + G Jj > g j will occur when the
first order conditions yield the following values when the tax revenue is maximized
or T max = G:

U j
W (T ) < 0 at g j = T max .
T
U j UG
max + (1 max ) W (T ) < 0 at g Jj + G J = T max5 .
T T

123
270 A. S. Mahmud

j
5 Step 1: Envelope theorem and G > g Jj + G Jj > g j leads to:

     
 j    j j    u G 
 u j  u 
u     
   j G j
  = W gi <  +  = W g j + G j <   = W G .
i J J
   
(Result 1)

The joint maximization of { j, G} :

   
j j

uj
j
uG W T J 
uj W T J
+ =0 < 0; T J = g Jj + G Jj .
T T T J T T J
(Result 2)
       
 j  j    j
u j   
  uj W T J T J  u j 
   W g Jj + G Jj  >< 
  =  T T J .
     

Step 2: Since the military regime has no reduction in military expenditure but there is
when G forms a coalition with j:
   j 
 u G    J
 G  uG T 
 =0< .
   T 

When i challenges, the payoff of the coalition { j, G} declines:


  
j
Pi u iG + (1 Pi ) 
uG c
< 0; i = j = A, B.

But the payoff of when G is independent does not:

      
j
Pi u ij + P j u j + PG u Gj c
= 0; i = j = A, B.

Pi
i  PG
G
Pi +PG uG + Pi +PG uG c
= 0; i = j = A, B.

This proves part (a). The results of part (b) can be deduced from differentiating thresh-
old values with respect to and inserting Results 1 and 2.

5 max is the share of tax revenue spent on public good for group j when T = T max .

123
Political regimes: a coalition formation approach 271

Case I of subsecon 7.1 in Figure 1: In the

{A} rst case, the alliance with G yields
PA higher payo than that of
unconstrained democracy. The
PA+PB=1-PG expression PA+PB=1-PG can be seen as the
civil power and each line for dierent
{A, G} values can be termed as iso-civil power
{A, B} lines. Higher civil power leads to more
likely event that the military is not in
power. If either A or B has excessive
{A, B, G} 1- P G
power, a civilian dictatorship occurs.

P A
1- P G
{G} {B, G} {B}

PB PB

{A}

Case II of subsecon 7.1 in Figure 2:

Unlike the rst gure, the second one
{A, G} describes the case in which the alliance with
yields lower payo than that democracy. As
{A, B}
a consequence democracy is a more likely
event as seen in the diagram.
{A, B, G}

{G} {B, G} {B}

PB PB

123
272 A. S. Mahmud

1
{G}
PG

{A, B, G}

1 2 Pi

PG {A, G} {B, G}

{A, B}

0,0 v v 1
vA

Subsecon 7.2 in Figure 3: Unconstrained democracy occurs when G has no

credible threat against {A, B} and both A and B have suciently high probability
of winning an elecon. High probability electoral defeat can lead to an alliance

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