Munich Personal RePEc Archive

A Theory of Political Participation

Isa, Berk Orkun and Yucel, Mustafa Eray

BBVA Research, Bilkent University

5 July 2020

Online at https://mpra.ub.uni-muenchen.de/108818/
MPRA Paper No. 108818, posted 19 Jul 2021 12:59 UTC
 ∗
A Theory of Political Participation
Berk Orkun Isa† Mustafa Eray Yucel‡

July 5, 2020

Abstract
This paper lays down a mathematical model of political participa-
tion where participatory behavior functions as insurance against redis-
tribution of resources. Abstracting a broad notion of political partic-
ipation to its tangible benefits and costs, we elaborate the participa-
tory behavior from the perspectives of Expected Utility and Cumulative
Prospect Theory. Our elaboration reveals that the relative degrees of
risk aversion and loss aversion yield a multiplicity of equilibria, sheds
light on the recently observed absenteeism in political participation
and suggest that participation would not increase unless the material
domain of politics itself is altered.

Keywords: Political Participation, Cumulative Prospect Theory,

Risk Aversion, Insurance, Lobbying.

∗
The article does not necessarily reflect the views of Garanti BBVA & BBVA Research.
†
Junior Economist, BBVA Research, Istanbul, Turkey. E-mail: berk.isa@gmail.com
‡
Lecturer, Department of Economics, Ihsan Dogramaci Bilkent University, Ankara,
Turkey. E-mail: eray@bilkent.edu.tr

1
1 Introduction
May be one of the best definitions of political participation was made by
Pericles who said “An Athenian citizen does not neglect the state because
he takes care of his own household; and even those of us who are engaged
in business have a fair idea of politics. We alone regard a man who takes no
interest in public affairs, not as a harmless, but as a useless character; and
if few of us are originators, we are all sound judges of policy.” Today, in a
typical election involving many voters, the fact that one vote alone is unlikely
to alter the vote result do not make people refrain from participating, as it
did not throughout the human history. This situation is often termed as the
paradox of voting and it keeps the study of political participation as a vivid
topic.
In a popularly instructed textbook of introductory political science, the
key characteristics of a democratic citizen were listed as tolerance, active
participation, high level of interest and information and support for the
state (Shively, 2003: 152-154). Among these, political participation pre-
scribes citizens to do more than just voting. In that, campaign work, cam-
paign contributions, intermittently contacting government officials, involv-
ing in demonstrations, undertaking informal yet collective work to tackle
with community issues and serving in voluntary capacity on a local govern-
ing body can be considered as types of political participation which are not
necessarily mutually exclusive (Shively, 2003: 155). Indeed, as covered in
the next section, there are several and not necessarily rivalling perspectives
to political participation. Despite, to the best of our knowledge, there is no
parsimoniously strong microeconomic model of political participation which
is simply based on agents’ behaviors.
Against this background, this paper lays down a mathematical frame-
work of political participation where political participation is modeled as
insurance against redistribution of resources. Considering a broad and ab-
stract notion of political participation, where it is defined in terms of its
tangible benefits and material costs, we elaborate the participatory behav-
ior from the perspectives of Expected Utility and Cumulative Prospect Theory
separately. Our findings shed light on abstention from political participation
which has recently been observed as a worldwide phenomenon.
The novelty of this study comes from our approach to amalgamate a well-
known microeconomic construct with concrete behavioral or psychological
foundations of human behavior. It explicitly stems from (i) risk aversion
within an agent model setup, (ii) factoring in the behavioral frictions and
(iii) a dynamic approach to solve for equilibrium-level participation, given

1
the level of insurance premium, here the participation fee. In our model,
without loss of generality, the society is thought to be composed of two
kinds of agents, namely those being taxed (Senders) and those being sub-
sidized (Receivers). In order to keep the model parsimonious enough, we
envision an exogenous probability of taxation-subsidization and let the two
kinds of agents reveal their optimal set of actions. Though these actions
do not brightly reveal interesting outcomes from an Expected Utility point
of view, formation of equilibria turns out to be very informing from a Cu-
mulative Prospect Theory point of view. In that, optimal equilibria were
characterized at the nexus of risk aversion and loss aversion of individuals.
So, the paper provides fruitful insights to not only economists but also to
political scientists, mainly owing to rich potential of the involved variables
to be operationalized by these two groups.
The remainder of the paper is structured as follows: Section 2 presents
the related literature in terms of the existing perspectives to political par-
ticipation, Section 3 presents our agent model framework, and Section 4
provides the predictions of the model. Section 5 concludes.

2 Perspectives to Political Participation

A comprehensive list of political participatory efforts is called the Milbrath’s
(1965: 18) list and it includes in decreasing degree of participation (i) hold-
ing public or party office, (ii) being a candidate for office, (iii) attending a
caucus or a strategy meeting, (iv) becoming an active member in a polit-
ical party, (v) contributing time in a political campaign, (vi) attending a
political meeting or rally, (vii) making a monetary contribution to a party
or candidate, (viii) contacting a public official or a political leader, (ix)
wearing a button or putting a sticker on the car, (x) attempting to talk
another into voting a certain way, and (xi) initiating a political discussion.
In Rueden (2007) the last four of these are classified as ‘spectator actions’,
the middle three as ‘transitional actions’ and the first three as ‘gladiator
actions’. This list, despite originally given for Americans, is likely to apply
to other societies with quite some generality. Still, leaving aside a general
and casual tendency to equate political participation to sole action of voting
in elections or referenda, it is hard to say that a unique definition of political
participation is reached among the scholars.1
1
A narrow focus on voting reveals that while suburban residents, well-educated people,
well-off people, farmers (USA), blue-collar workers (Europe) tend to participate more,
young people, poor people, women (except in Europe and North America), racial minori-

2
 A possible reason for lacking a commonly agreed definiton may be the
expansion of the political participation repertoire over time. While 1940s
witnessed mainly voting and 1950s witnessed campaigning and contacting
officials as conventional forms of participation, 1970s witnessed protest ac-
tions and social movements and 1990s came with social engagement and
civic participation as unconventional forms. In that, as van Deth (2001)
underlined, the study of political participation became the “study of ev-
erything”. As van Deth suggests, an a priori exclusion of specific areas
like family, school or workplace, or development of a more substantive and
problem-oriented research perspective can be useful in dealing with the ex-
pansion of the repertoire. The conceptual concerns seem to have continued,
as one may reveal in the efforts of Teorell (2006) and Lamprianou (2013).
Teorell (2006) provides a useful set of conceptions where he subdivides par-
ticipation into influencing attempts, direct decision making and political
discussion. In terms of consequences, political participation is directed to-
ward equal protection of interests via influencing attempts, self-development
via direct decision making and subjective legitimacy via political discussion,
in Teorell (2006). In his synthesis of these elements to reach a sound ana-
lytical framework, Teorell (2006) underlines the resources (physical, human
and social) as well as incentives (general and selective) and he attaches the
key importance to the “interplay” between resources, incentives and action.2
Lamprianou (2013), while providing a critical evaluation of the contempo-
rary political participation research, underline the absence of a unique and
commonly agreed definition of political participation.3
As a remedy for the lack of a robust definition for political participation,
van Deth (2016) offers a set of eight rules to identify the ‘things’ that are
forms of political participation. Such an approach can relieve the inherent
ties and blue-collar workers (USA) tend to participate less (Shively, 2003: 233).
2
This article proposes an agenda for political participation research aimed at providing
empirical answers to questions derived from normative political theory. Based on a three-
fold distinction between responsive, participatory and deliberative models of democracy,
the article first distinguishes three conceptions of political participation: as influencing
attempts, as direct decision making, and as political discussion. Second, it is argued
that each of the three models is associated with different desired consequences of political
participation: equal protection of interests, self-development and subjective legitimacy.
Third, a procedural standard is identified from which to evaluate the mechanism generat-
ing the three types of participation. By analogy with theories of distributive justice, this
mechanism should be sensitive to incentives but insensitive to resources. The empirical
questions thus implied are finally drawn together into an integrated agenda for future
participation studies.
3
In Lamprianou’s work, political participation is elaborated with respect to social con-
texts, Bourdieu’s concept of ‘habitus’, class, post-modernism and socialization theories.

3
tensions between scholars vis-a-vis an array of new developments. In that,
(1) political participation must be an activity or action rather than a simple
interest, (2) this action must be voluntary rather than pressure-induced,
(3) this voluntary action must be performed by nonprofessionals rather
than paid professionals, (4) the nonprofessional voluntary action should
never lose the adjective ‘political’, (5) it must be targeted at the sphere of
government, state and politics (6) it must be aimed at solving collective
or community problems (7) it must remain within a political context or
(8) it must be used to express political aims and intentions. van Deth’s
(2016) set of rules seem to have addressed the concerns by Teorell (2006)
and Lamprianou (2013) while embracing Milbrath’s (1965) basic list.
Potential disagreements or confusions seem infrequent in the literature,
possibly owing to the relative ease of operationalization even in the absence
of a unique conceptualization. For instance, McAllister and Makkai (1992)
report substantial variations in the levels of participation observable among
different social groups. Their results show that immigrants socialized in
countries lacking continuous democratic traditions have political trust, but
also display more authoritarian values. Furthermore, differences are not only
in type of participation but also among ethnic groups.4 Back et al. (2004)
present collective interests and selective incentives as two alternative expla-
nations to political participation and two solutions to paradox of participa-
tion. Based on their analysis, individuals who are active in parties are not
mainly driven by the goal to influence policy; instead, such activity seems to
be motivated by selective, in specific expressive, incentives. Rueden’s (2007)
computer simulation to empirically test the Milbrath’s framework reveals
that Milbrath’s framework may be viable. Both political institutions and
social capital seem to be significant contributors to political participation.
Rueden (2007) with regard to social capital, reveals that personal contacts
appear to be more important for political participation compared to just the
time spent in a community.5
The work of Dawes et al. (2011) is an interesting one owing to the
preference-related aspects of political participation revealed. Upon their
study of the impacts of social preferences, they reveal that those who were
most interested in increasing total welfare were more likely to participate in
politics compared to subjects with selfish preferences, whereas subjects most
4
According to McAllister and Makkai (1992), resource and social learning theories of
political participation are complementary rather than exclusive.
5
Vrablikova’s (2010) study can be further visited to see an empirical decomposition of
political participation in terms of predispositions (socioeconomic status and motivations),
mobilizing channels, contextual effects and cross-level effects.

4
interested in reducing the difference between their own well-being and well-
being of others were no more likely to participate than the selfish. These
findings have strong parallels with the effects of possible psychological dis-
positions. In a similar (yet not subsequent) spirit, Aytac and Stokes (2016)
offer a new theory to explain why people take part in political action, in par-
ticular why they vote and join protests. They mainly underline the potential
benefits of considering the costs of abstention in addition to direct material
costs of participation. With regard to the existing approaches to political
participation, they find the rational choice theory interpretation as “prob-
lematic”6 , calling for a higher share of psychology rather than economics for
better comprehension of political participation.
All in all, the paradox of participation is neither a dominant mode, nor
is it totally absent. Especially recently, people’s interest in political pro-
cesses seem to have declined worldwide. Though, it is hard to say that
benefits of politics have declined at the same proportion. Observations of
this class call for further re-examinations of political participation. In this
paper, by considering a broader and possibly an abstract notion of political
participation, we introduce an economic as well as psychological perspective.
Where participation comes with certain tangible benefits and material costs,
it is considered to be an activity of economic nature along with the individ-
ual decisions pertained. This economic nature is not different than that of
Acemoglu and Robinson (2006) which attribute the ultimate outcome of a
democratic era or a dictatorship to direction of power relations among three
classes with robust bilateral power relations. In further detail, Alesina and
Passarelli (2014) investigate loss aversion in a majority voting setup and
they reveal loss aversion implying a moderating effect. In our case, loss-
or risk-aversion plays a central role rather than having moderating effects
alone.7
Based on the literature given, we abstract a broad notion of political par-
ticipation to its tangible benefits and costs and elaborate the participatory
behavior from the perspectives of Expected Utility and Cumulative Prospect
Theory. Our abstraction, as demonstrated in the next section in detail, al-
lows us to reflect upon the earlier classifications of participatory behavior
without risking over-reduction. More importantly, by allowing for a non-
mechanical vision of rationality through the Cumulative Prospect Theory
we provide a simultaneously economic and psychological treatment of the
6
According to Aytac and Stokes (2016), (1) abstention can be costly, (2) many people
think about the strategic setting of elections and protests from a supra-individual vantage
point, (3) to understand political participation, we need less economics, more psychology.
7
Alesina and Giuliano (2009) can also be seen for some insights.

5
question at hand, in a way to address the criticism by Aytac and Stokes
(2016).

3 Agent Model
The model8 hosts, without loss of generality, two representative agents who
are determined at time t by the status quo to be either Receiver or Sender.
Utility function for both is homogeneous and both derive utility from their
current wealth levels that are betoken as Wt,R and Wt,S as in (1) and (2):

δ
UR (Wt,R ) = Wt,R (1)

γ
US (Wt,S ) = Wt,S (2)
where γ, δ ∈ R+ and 0 < γ < 1, 0 < δ < 1; so, both functions satisfy the
concavity conditions (3) and (4) where Wt,R , Wt,S ∈ R+ .

∂UR (Wt,R ) ∂ 2 UR (Wt,R )

> 0, 2 <0 (3)
∂Wt,R ∂Wt,R

∂US (Wt,S ) ∂ 2 US (Wt,S )

> 0, 2 <0 (4)
∂Wt,S ∂Wt,S
At any period t, a pre-determined amount of tax might be imposed on
Sender, which is denoted by T , to be transferred to Receiver. T ∈ R+ and
incurs with the probability of 0 < p < 1. When T is incurred on Sender,
the agents’ wealth in period t + 1 become:

Wt+1,S = Wt,S − T (5)

Wt+1,R = Wt,R + T (6)

where agents calculate their expected utility for the period t + 1 as:

EUR (Wt+1,R ) = p(Wt,R + T )δ + (1 − p)(Wt,R )δ (7)

EUS (Wt+1,S ) = p(Wt,S − T )γ + (1 − p)(Wt,S )γ (8)

8
In this submitted version of the paper, all the derivation stages are given for editorial
convenience.

6
 If Sender wants to avoid the possibility of this tax incurrence, she has
the option to buy an insurance policy that requires her to pay a premium of
P R. If she pays the premium P R, then she would have no obligation to pay
T . Note that, she only buys the insurance package if expected utility in t + 1
under the possibility of tax incurrence is smaller than the expected utility
under the purchase of insurance in t + 1. When Sender buys the insurance,
her expected utility becomes:

EUS (Wt+1,S ) = p(Wt,S − P R)γ + (1 − p)(Wt,S − P R)γ = (Wt,S − P R)γ (9)

Alternatively, when Sender does not buy the insurance:

EUS (Wt+1,S ) = p(Wt,S − T )γ + (1 − p)(Wt,S )γ (10)

Therefore,

(Wt,S − P R)γ > p(Wt,S − T )γ + (1 − p)(Wt,S )γ (11)

((Wt,S − P R)γ )1/γ > (p(Wt,S − T )γ + (1 − p)(Wt,S )γ )1/γ (12)

Wt,S − P R > (p(Wt,S − T )γ + (1 − p)(Wt,S )γ )1/γ (13)

P R ≤ Wt,S − (p(Wt,S − T )γ + (1 − p)(Wt,S )γ )1/γ (14)

The condition in (14) depicts the situation where Sender opts for the
insurance. If P R is low enough, Sender pays the premium and maintains a
higher level of utility, which is quite an intuitive outcome under the usual
assumptions, which from here on will refer to expected utility theory condi-
tions.

3.1 Departure to Cumulative Prospect Theory

In a situation where agents measure their utility levels in line with Cumu-
lative Prospect Theory’s assumptions, CPT hereafter, the condition (14) is
due to change. Under CPT, probabilities are not weighted linearly, thus
prospective gains are multiplied by weighted probabilities. In the case of
positive prospects, the envision of wealth by the agents become:

pα
W + (p) = (15)
[pα + (1 − p)α ]1/α

7
whereas, in the case of negative prospects, we have:

pθ
W − (p) = (16)
[pθ + (1 − p)θ ]1/θ
According to CPT, all agents embody a certain degree of loss aversion,
which is denoted here by λ. As the CPT utilizes reference dependence
principle in order to reflect the effect of loss aversion, a new set of utility
functions is considered as in (17) and (18):

UR (Wt+1,R ) = (Wt,R + T )δ + T (17)

US (Wt+1,S ) = (Wt,S − T )γ − λT (18)

where λ ∈ R+ and λ > 1. Therefore, the CPT compatible expected utility
of the Sender is:

γ
CP T (Wt+1,S ) = [W − (p) − W − (0)][(Wt,S − T )γ − λT ] + [W + (1 − p) − W + (0)]Wt,S (19)

This projection depicts the case where Sender does not opt for the insur-
ance package. If Sender decides to purchase the package, then her projection
would be:

CP T (Wt+1,S ) = (Wt,S − P R)γ − λP R (20)

For Sender, CPT compatible expected utility projection in the case
where she decides to purchase insurance must be higher than the expected
utility projection in (19) in order to convince her that purchasing the insur-
ance package is the sound strategy. Hence, she would buy the package if the
condition in (22) is satisfied:

γ
(Wt,S − P R)γ − λP R > W − (p)[(Wt,S − T )γ − λT ] + W + (1 − p)Wt,S (21)

1 γ
PR ≤ [(Wt,S − P R)γ − W − (p)[Wt,S − T ]γ − λT ] − W + (1 − p)Wt,S ] (22)
λ
Under usual assumptions, only effective factors were mere probabilities.
However, P R level where Sender is willing to buy the insurance package
depends highly on two other factors: (i) degree of risk aversion and (ii) degree

8
of loss aversion. Former factor is derived from the coefficient of constant
relative risk aversion for Sender, namely (1 − γ), and as α and θ variables
in equations (17) and (18) are functions of (1 − γ), risk aversion degree of
Sender becomes a notable factor on critical P R value. It is important to
highlight that Sender and Receiver have different coefficients of constant
relative risk aversion, since γ 6= δ. That being said, degree of loss aversion
for both agents is assumed to be the same.

3.2 Certainty Equivalents and Risk Premiums

If we assume that Sender calculates her future utility in line with EU theory,
her certainty equivalent, CE(.), as a function of wealth would be:
γ
EU (Wt+1,S ) = p(Wt,S − T )γ + (1 − p)Wt,S (23)

CE(Wt+1,S ) = mγS = p(Wt,S − T )γ + (1 − p)Wt,S

γ
(24)

γ 1/γ
m1S = [p(Wt,S − T )γ + (1 − p)Wt,S ] (25)
and the risk premium for Sender is:

RPS = p(Wt,S − T ) + (1 − p)Wt,S − mS (26)

γ 1/γ
RPS = p(Wt,S − T ) + (1 − p)Wt,S − [p(Wt,S − T )γ + (1 − p)Wt,S ] (27)

If she calculates her future utility in line with CPT, then her certainty
equivalent becomes:

γ
CP T (Wt+1,S = W − (p)[(Wt,S − T )γ − λT ] + W + (1 − p)Wt,S (28)

γ
CE(Wt+1,S = mγs = W − (p)[(Wt,S − T )γ − λT ] + W + (1 − p)Wt,S (29)

γ 1/γ
mS,2 = [W − (p)[(Wt,S − T )γ − λT ] + W + (1 − p)Wt,S ] (30)

9
3.3 Lower Bound and Upper Bound
In the previous subsections, we have examined two different scenarios for the
Sender agent. In the first scenario, Sender calculates a benchmark insurance
premium according to EU theory, which equals to:
γ 1/γ
Wt,S − [p(Wt,S − T )γ + (1 − p)Wt,S ] (31)
Under the assumptions of CPT, Sender calculates another benchmark
insurance premium according to:

1 γ
[(Wt,S − P R)γ − W − (p)[(Wt,S − T )γ − λT ] − W + (1 − p)Wt,S ] (32)
λ

Proposition 1: For any Wt,S > 0 and λ > 1, P Rmax,CP T > P Rmax,EU .

Proof. Under the CPT conditions agents in this model are more willing to
pay insurance. Thus P Rmax,CP T represents the upper bound of premium
curve i.e. the maximum premium amount which Sender is willing to pay un-
der CPT conditions. Moreover, EU just takes expected losses into account,
nothing more. Thus, for any λ > 1 i.e. additional effect of loss aversion
degree, the maximum premium amount which Sender is ready to pay is al-
ways higher than P Rmax,EU . P Rmax,EU in this model represents the lower
bound i.e. the maximum premium amount which Sender is willing to pay
under EU conditions.

Proposition 2: Actual market level of P R, namely P RA ∈ R+ , is such that

P Rmax,CP T ≥ P RA ≥ P Rmax,EU .

Proof. Note that neither P Rmax,CP T nor P Rmax,EU represent the extremis,
the extremis is rather sustained as T approaches to Wt,S as shown in (33)
and (34):

limT →W P RCP T = ∞ (33)

γ 1/γ
limT →W P REU = Wt,S − [(1 − p)Wt,S ] = Wt,S [1 − (1 − p)1/γ ] (34)

It is important to highlight that P RA is exogenously given at t=0. Under

EU theory assumptions, there exists a limit when T goes to Wt,S . However,

10
under the CPT conditions, there is no limit for P RCP T , since a limit does
not exist when we approach to Wt,S from left. In plain terms, when T
approaches to Wt,S , i.e. the entire wealth of Sender, there is no value for
P R in the negative zone since Sender is risk averse and T → Wt,S indicates
the situation where she loses everything.

3.4 Measures of Political Participation

Due to the nature of this model, what is betoken as P R represents the cost
of political participation. Sender, essentially, faces with a decision where
current state might drastically affect her utility through her wealth. On
the other hand, Receiver is only facing with positive prospects. That being
said, her facing with positive prospects only does not mean that political
participation offers nothing to Receiver.
In the upcoming subsections, prospective benefits of political participa-
tion for Receiver will be depicted in detail. In this case, T naturally accounts
for the actual wealth transfer between different agents in a society. In t = 0,
the identities of Sender s and Receiver s are predetermined and salient, but
not neither side has any information about the identity of their counter par-
ties. Wealth transfer is intermediated by an institution which has only one
function, directing the wealth transfer. The institution does not have any
effects on the foretold process, but decisions of both agents shape the actions
of the institution.
If Sender wants to pay the premium and manage to avoid wealth transfer,
she also agrees to politically commit to a political establishment. One might
perceive this commitment as a declaration of individual preference. On the
other part, in t = 0 Receiver pays a fee to to be a part of the political
establishment and maintain the status quo. Receiver ’s decision to pay a fee
could also be perceived as a preference revelation.
The fee, C, corresponds to lobbying efforts by Receiver. Nevertheless,
this fee does not guarantee anything. These efforts affect the t = 0 and
t = 0 probability of Receiver getting the wealth transfer, where C ∈ R+ and
C < Wt,R and C < T . To simply describe the effect of C, we assume that it
doubles down the original probability of wealth transfer incurrence, namely
from p to 2p. Under these circumstances, if Receiver calculates her future
utility in line with expected utility theory’s assumptions:

EUR (Wt+1,R ) = 2p(Wt,R + T − C)δ + (1 − 2p)(Wt,R − C)δ (35)

If Receiver does not pay C and chooses to depend on pure probabilities,
then:

11
 EUR (Wt+1,R ) = p(Wt,R + T )δ + (1 − p)(Wt,R )δ (36)
Under these terms, Receiver opts to put lobbying efforts only when:

2p(Wt,R +T −C)δ +(1−2p)(Wt,R −C)δ > p(Wt,R +T )δ +(1−p)(Wt,R )δ (37)

Solving for C, we obtain:

p(Wt,R +T )δ +(1−p)(Wt,R )δ −(1−2p)(Wt,R −C)δ ) 1/δ

C ≤ (Wt,R + T − ( 2p ) (38)

Condition (38) expresses the point of indifference for Receiver, under

expected utility theory assumptions. The right hand side of the equation
is heretofore betoken as P IR,EU . On the other hand, Receiver calculates a
different path under cumulative prospect theory. If she chooses to put on
lobbying efforts, she has:

CP T (Wt+1,R ) = [W − (1 − 2p) − W − (0)][(Wt,R − C)γ − λC] + [W + (2p) − W + (0)][(Wt,R + T − C)γ ] (39)

and otherwise:

CP T (Wt+1,R ) = [W + (p) − W + (0)][(Wt,R + T )δ ] + [W + (1 − p) − W + (0)][Wt,R

δ ] (40)

From (39) and (40) we obtain (41), where the point of indifference for
Receiver is found by setting the left hand side of the inequality to 1.

W − (1−2p)−W − (0)][(Wt,R −C)δ −λC]+[W + (2p)−W + (0)][(Wt,R +T −C)δ ]

δ ]
W + (p)−W + (0)][(Wt,R +T )δ ]+[W + (1−p)−W + (0)][Wt,R
> 1 (41)

As (41) suggests, the point of indifference for Receiver is highly depen-

dent on the degree of risk aversion and current wealth level, under CPT
conditions. This dependence, indeed, allow us to reach different characteri-
zations of participatory behavior, as elaborated in the following subsections.

12
3.5 Participation Under Two Theories
Under the assumptions of expected utility theory, there is a definitive upper
bound for the cost which Receiver is willing to bear for lobbying, as Propo-
sition 2 implies. On the other part, under CPT conditions, Receiver has
to bear the burden of a probable loss, nonetheless cost of lobbying never
reaches to a point where it equals her current wealth level, Wt,R , as assump-
tions of this agent model dictate. Therefore, the main intuition here is point
of indifference for Receiver has narrower bounds when compared to Sender.
After setting up the points of indifference for both agents, heretofore point
of indifference for Receiver and Sender will be betoken as P It,R and P It,S ,
respectively.
Following the subsection 2.4, nine different states might emerge under
each theory’s assumptions:

1. P It,R < C and P It,S > P R

2. P It,R < C and P It,S < P R

3. P It,R > C and P It,S < P R

4. P It,R = C and P It,S = P R

5. P It,R > C and P It,S > P R

6. P It,R < C and P It,S = P R

7. P It,R > C and P It,S = P R

8. P It,R = C and P It,S < P R

9. P It,R = C and P It,S > P R.

3.5.1 Handling the Nine States Under Cumulative Prospect The-

ory
If the point of indifference for Receiver is lower than the cost of lobbying
while the cost of insurance premium is lower than point of indifference for
Sender, no Receiver opts for bearing the cost of lobbying. On the other
side, every Sender opts to buy insurance and pays the current P R, which
can be described formally as a state where P It,R < C, and P It,S > P R. As
a result, Sender fully participate through insuring themselves against any
incurrences whereas Receiver s do not wish to take any action. This first
state indicates the case of full participation by Sender s where no wealth

13
transfer between agents takes place. Second, if P It,R < C, and P It,S < P R,
then neither Sender s nor Receiver s take any action to create an advantage
for themselves. Second state, as elaborated here, reflects the case of main-
tained status quo. Third, if P It,R > C, and P It,S < P R, all Receiver s prefer
to bear the cost of lobbying, while no Sender opts to buy insurance. This
state reflects the case of full participation by Receiver s where wealth trans-
fer between agents is twice as likely. Fourth, if P It,R = C, and P It,S = P R,
then an equilibrium can be sustained in a case where PR=C because when
the insurance premium is equal to cost of lobbying, all agents make moves
to protect or create a more advantageous environment for themselves. At
this point, it is vital to remember that these two distinct agents have two
distinct degrees of risk aversion. In addition to that, Proposition 2 clearly
expresses the increasing tendency to buy insurance as T approaches to W .
In the light of these assumptions, Sender s gain a unique position in terms
of sustaining the equilibrium, as following proposition reflects.

Proposition 3: There must be a small enough γ for every level of T that

sustains P R = C, in other words, P It,R = P It,S . Under all other conditions,
P R < C when P It,R = C and P It,S = P R.

If there is no such γ for every possible level of T , i.e. if Sender is compar-

atively more risk averse than Receiver, aforementioned equilibrium where all
agents participate in their own terms cannot be sustained.

Table 1: Four Different Equilibria Under CPT

Condition P It,R < C P It,R > C P It,R = C

P It,S < P R (N, N) (N, F) (N, I)

P It,S > P R (F, N) (F, F) (F, I)

P It,S = P R (I, N) (I, F) (I, I)

Fifth condition depicts a set of circumstances where both agents are

willing to commit to a political establishment. However, because of the

14
dominance of Sender ’s choice, no wealth transfer occurs even though Re-
ceiver is willing to bear the cost of participation. Sixth condition describes a
situation where Receiver is not willing to commit to a political establishment
as the cost of lobbying is higher than the point of indifference. On the other
side, Sender is indifferent between committing to a political establishment
and taking no action at all. Seventh condition brings a different picture. Re-
ceiver is willing to bear the cost of political participation, whereas Sender is
indifferent. Under these circumstances, Sender might choose to participate
only if P R = C. Here, Proposition 3 is valid once more, thus under given
level of T , Sender must be significantly more risk averse than Receiver in or-
der to decide to participate. Eight condition provides a set of circumstances
where Sender is not willing to participate whereas Receiver is indifferent,
therefore if Receiver is more risk loving than Sender for the given level of
T , she will bear the cost of participation. Ninth and final condition also
provides the same result with the fifth condition, because of the dominance
of Sender ’s choice.

3.5.2 States Under the Expected Utility Theory

The first three states of the previous subsection apply here, whereas the
fourth state changes, as equilibrium is sustained where P R = C.
When equations (41) and (16) are solved together, one can observe that
γ
equilibrium can only be sustained when (1 − p)Wt,S > 1/2(p(Wt,R + T )δ . If
this condition is satisfied, all Receiver s and Sender s actively participate in
their own terms, the condition implying a significantly low risk aversion for
Sender.
Main difference between two theories’ implications on this model in terms
of equilibrium stage is, under CPT conditions, Sender gets closer toward
utilising all of her wealth towards protecting herself against the probable
burden of wealth transfer, whereas Receiver is in a sole attempt of maxi-
mizing the amount of the subject transfer. Hence, CPT conditions require
a substantially low risk aversion level from Sender which shapes her final
utility level.

4 Predictions
In the 21st century, one of the most controversial issues that social scientists
face has been the political engagement and its nature. How do people decide
to participate in a political organization? What are the driving forces which

15
nudge people towards political engagement? Do “transfers” from one seg-
ment of people to another play the largest role? These questions provided
the starting point of this work. In the relevant literature of political par-
ticipation and political economics, these questions were commonly handled
by assuming that all agents are fully rational. In this work, however, we
factored in the risk aversion degree that all agents embody and search for
the possible effects which inclusion of risk aversion degree may bring onto
the table of relevant literature. Hence, we utilize the tools provided by be-
havioral economics literature in order to examine the dynamics of political
participation. So, by including the risk aversion feature, this study suggested
a model handling the issue of political participation from the perspective of
transfers between agents.
The agent model and derived conditions in this work attempts to ex-
amine political participation preferences from the individual risk perception
point of view. Both agents shape their preferences according to probabil-
ities in a one-shot game environment. The reason why this work utilizes
two widely expected theories of individual utility is to create a frame in
which boundaries of risk taking behavior is well defined and limited. Agent
model is specified in a way that depicts the effect of wealth transfer between
two agents on micro level, thus deriving the aggregated effects is subject to
future work.
As the previous section has shown, decision of both agents in terms of
participation is dependent on their risk aversion degrees. Indeed, specifica-
tion of the model creates a dominance in the favor of Sender, as her decision
shapes up the result directly. Rationale behind this specification is, ”insur-
ance” approach to political participation covers multiple factors, hence the
”usual” expected price of participation i.e. insurance is high however when
agents factor in loss aversion and risk aversion, namely CPT conditions, im-
plied cost of insurance for agents becomes less significant. Naturally, driving
factor behind agents’ perception is their risk aversion. The difference in their
risk aversion is what makes wealth transfer possible between them.
The most important prediction of our model emerges when both agents
are indifferent between participation and taking no action. Under these
circumstances, comparative state of two agents’ risk aversion degrees comes
on to the stage. There is a probable equilibrium of participation costs (C
and P R) an equilibrium which is created by the equivalence of points of
indifference of both agents and only occurs if Sender is less risk averse than
Receiver for a given level of tax (T ). If this condition is satisfied, cost of
participation becomes unique, where neither of the two agents move away
and status quo is maintained.

16
 In cases where Receiver is willing to participate politically even though
Sender also decides to participate, a net welfare loss (C) occurs in the model
as the dominance of Sender ’s choice eradicates any possibility of wealth
transfer. These cases lead us to the prediction that in a framework where
risk aversion degrees of all agents are not well-defined, full participation
always creates a net welfare loss; however, no directed inequality is created
through an institution.
Another prediction emerges from the Proposition 2. Upper bound as-
sumption in the second section provides us the potential behavior of Sender s
in case of increased taxes (T ) or a lower level of wealth (Wt,S ). If amount of
prospective wealth transfer increases or initial wealth of Sender decreases,
Sender s will be more likely to participate. For Receiver, initial wealth also
plays an important role in terms of likelihood of participation, however, she
does not move towards upper bound as much as Sender does since only bur-
den Receiver might bear is the cost of participation and as model indicates,
it is lower than the amount of taxes (T ) under all circumstances.
For future work, setting up a framework in order to calculate the P RA
for Sender agents after the first period we handle here, as well as examining
the aggregated effects might produce interesting insights about participation
preferences. An empirical study on the predictions of this model would
also provide valuable information about participation preferences which we
attempt to model here.

5 Concluding Remarks
In this study, we lay down a mathematical model of political participation.
Abstracting the relevant constructs of the earlier literature to tangible bene-
fits and costs of participatory behavior, and separately solving for equilibria
under the Expected Utility Theory and Cumulative Prospect Theory, we shed
some theoretical light on differing degrees of political participation. Owing
to the very nature of our model, a change in participatory behavior cannot
be expected in the absence of changes in the material domain of politics.
This suggestion, of course, mechanically follows from our abstraction of ben-
efits and costs involved. What matters more, on the other hand, is that our
model’s ability to relate the occurrence of a multiplicity of equilibria to al-
terations in material factors, in a realistic world of agents who are endowed
with a bounded rationality.
The model is novel not because it invents a new construct. Rather, its
ability to apply a well-known microeconomic framework (insurance) to a

17
political scientific construct (political participation) is the source of novelty.
In that, acccounting for the bounded rationality of agents and for the result-
ing differentiation betweeen agents’ risk aversion and loss aversion enable us
to have a good grip of the topic. So, the paper is believed to provide rich
insights to a broad range of social scientists.

Conflict of interest
We, the authors, declare that we do not have any conflict of interest.

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