Single round vs. runoff elections under plurality rule: A theoretical analysis

We compare single round vs. runoff elections under plurality rule, allowing for partly endogenous party formation. With large and sufficiently polarized groups of moderate voters, under runoff elections, the number of political candidates is larger, but the influence of extremist voters on equilibrium policy and hence policy volatility is smaller, because the bargaining power of the political extremes is reduced compared to single round elections. These results are robust to several extentions.