Duverger's hypothesis, the run-off rule, and electoral competition

I analyze a model of electoral competition with entry under the run-off rule. I consider both two- and multiple-party systems. The principal result is that two-party systems may prove stable under the run-off rule: I show that a continuum of equilibria exists in which only two parties enter and subsequent entry is deterred. This finding conflicts with the accepted wisdom on the run-off rule encapsulated by Duverger's Hypothesis. The results of the model are then reconciled with Duverger's Hypothesis and a more precise formulation is proposed.