It has been a matter of abiding mystery, at least to me, why political pundits don’t bother to check with economic theory to validate whatever they are saying. There is zero effort on their part to figure out the nature of political competition which is very similar, or even identical, to what economics calls oligopolistic competition.

Oligopolistic competition is when a few firms compete with each other. That’s exactly what happens in elections. Economists have been analysing the behaviour of such firms for around 150 years now.

The first of them was a 19th century French mathematician called Antoine Augustin Cournot. He said that usually firms decide how much they will produce independently of the other firms.

This is how political parties also behave. They decide the number of seats they will contest, independently of how many other parties will contest.

Cournot also said that these firms, whose number is fixed, produce identical products. This is true of political parties also.

Nor do these firms collude because each has some market power. Their competition is in output, not prices. Most importantly each firm’s marketing strategy is based on that of its main competitor. Think manifestoes.

Later, another French economist called Francois Bertrand came up with the opposite theory. Firms compete on prices, he said, and consumers choose the quantities they will buy. In politics this happens at the constituency level. Each party in a constituency says here’s my candidate and the voters then vote in larger or smaller numbers for them.

In this sense, the Cournot and Bertrand models of oligopolistic competition are both applicable to political competition. They complement each other.

Leaders and followers

But there is a third way suggested by the German economist, Friedrich von Stackleberg, in 1934. This comprises market leaders and followers. The leader makes the first move and the followers follow with their moves.

Some conditions apply such as the leader must have enormous commitment power and can’t backtrack once committed. Ram Mandir was a case in point for the BJP and caste based reservation continues to be for the Congress and other parties.

The most interesting thing about this model is the ability of the follower to hurt the leader. This happens when, in order to hurt the leader the follower is willing to hurt itself. The Congress is a good example of this vis-a-vis say it’s refusal to go the Ram temple. But neither in economics nor in politics is this threat credible.

I am aware that the analogy with economics can’t be pushed too far. But on the whole the different theories of oligopolistic competition offer enough insights into political competition to enable a more coherent analysis than what our experts offer.

For example, in the 2024 general election, the competition is between two major formations, the NDA and the so-called INDIA alliance. Cournot-like, the BJP has set its ‘output’ at 300 seats. It is contesting around 450. The Congress is contesting around 325.

But given that the BJP has weak brand pull and distribution outlets in about 180-200 seats in the south and the east, this means it must win 300 out of 343 seats or, if it’s lucky, out of about 365 seats.

That’s a strike rate of around 80 or more per cent. For a party that’s been in power for a decade that is probably too high. Even a 70 per cent strike rate gives it only about 255. A strike rate of 60 will place it at a serious disadvantage.

We can see from this how economic analysis of oligopolistic competition allows us to get reasonably accurate forecast, give or take 10 per cent as error margin because of the dynamics of oligopolistic competition.