Abstract:
We consider a continuous time model for election timing in a Majoritarian Parliamentary
System where the government maintains a constitutional right to call an early election.
Our model is based on the two-party-preferred data that measure the popularity of the
government and the opposition over time. We describe the poll process by a Stochastic
Differential Equation (SDE) and use a martingale approach to derive a Partial Differential
Equation (PDE) for the government’s expected remaining life in office. A comparison
is made between a three-year and a four-year maximum term and we also provide the
exercise boundary for calling an election. Impacts on changes in parameters in the
SDE, the probability of winning the election and maximum terms on the call exercise
boundaries are discussed and analysed. An application of our model to the Australian
Federal Election for House of Representatives is also given.
