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Campaign Advertising and Voter Welfare

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Author Info
Prat, Andrea

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Abstract

This paper investigates the role of campaign advertising and the opportunity of legal restrictions on it. An electoral race is modelled as a signalling game with three classes of players: many voters, two candidates, and one interest group. The group has non-verifiable insider information on the candidates' quality and, on the basis of this information, offers a contribution to each candidate in exchange for a favourable policy position. Candidates spend the contributions they receive on non-directly informative advertising. This paper shows that: (1) a separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive; (2) although voters are fully rational, a ban on campaign advertising can be welfare-improving; and (3) split contributions may arise in equilibrium (and, if they arise too often, they are detrimental to voters). Copyright 2002 by The Review of Economic Studies Limited

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 69 (2002)
Issue (Month): 4 (October)
Pages: 999-1017
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Handle: RePEc:bla:restud:v:69:y:2002:i:4:p:999-1017

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Franklin M. Fisher & John J. McGowan, 1979. "Advertising and Welfare: Comment," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 726-727, Autumn. [Downloadable!] (restricted)
  2. Gary S. Becker & Kevin M. Murphy, 1990. "A Simple Theory of Advertising as a Good," University of Chicago - George G. Stigler Center for Study of Economy and State 58, Chicago - Center for Study of Economy and State.
  3. Baron, David P, 1989. "Service-Induced Campaign Contributions and the Electoral Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 45-72, February. [Downloadable!] (restricted)
  4. Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-50, June. [Downloadable!] (restricted)
  5. Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August. [Downloadable!] (restricted)
  6. Becker, Gary S & Murphy, Kevin M, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 941-64, November. [Downloadable!] (restricted)
  7. Potters, Jan & Sloof, Randolph & van Winden, Frans, 1997. "Campaign expenditures, contributions and direct endorsements: The strategic use of information and money to influence voter behavior," European Journal of Political Economy, Elsevier, vol. 13(1), pages 1-31, February. [Downloadable!] (restricted)
    Other versions:
  8. Lohmann, Susanne, 1994. "Information Aggregation through Costly Political Action," American Economic Review, American Economic Association, vol. 84(3), pages 518-30, June. [Downloadable!] (restricted)
  9. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August. [Downloadable!] (restricted)
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  10. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May. [Downloadable!] (restricted)
  11. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn. [Downloadable!] (restricted)
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  12. Cukierman, Alex, 1991. " Asymmetric Information and the Electoral Momentum of Public Opinion Polls," Public Choice, Springer, vol. 70(2), pages 181-213, May.
  13. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica, Econometric Society, vol. 65(5), pages 1029-1058, September.
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  14. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring. [Downloadable!] (restricted)
  15. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 465-91, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthias Dahm & Nicolás Porteiro, 2006. "Side Effects of Campaign Finance Reform," Working Papers 06.15, Universidad Pablo de Olavide, Department of Economics. [Downloadable!]
    Other versions:
  2. Christoph Vanberg, 2005. "“One Man, One Dollar”? Examining the equalization argument in support of campaign contribution limits," Public Economics 0512001, EconWPA. [Downloadable!]
    Other versions:
  3. Helios Herrera & David K Levine & Cesar Martinelli, 2007. "Policy Platforms, Campaign Spending and Voter Participation," Levine's Working Paper Archive 618897000000000935, David K. Levine. [Downloadable!]
    Other versions:
  4. Cotton, Christopher, 2007. "Informational Lobbying and Competition for Access," MPRA Paper 1842, University Library of Munich, Germany. [Downloadable!]
  5. Donald Wittman, 2005. "Valence characteristics, costly policy and the median-crossing property: A diagrammatic exposition," Public Choice, Springer, vol. 124(3), pages 365-382, September. [Downloadable!] (restricted)
  6. Laussel, Didier & van Ypersele, Tanguy, 2007. "Should We Really Expect More from Our Friends?," CEPR Discussion Papers 6233, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Andrea Prat & Riccardo Puglisi & James Snyder, 2005. "Is Private Campaign Finance a Good Thing? Estimates of the Potential Informational Benefits," Levine's Working Paper Archive 122247000000000960, David K. Levine. [Downloadable!]
  8. Eric Le Borgne & Ben Lockwood, 2002. "Candidate Entry, Screening, and the Political Budget Cycle," IMF Working Papers 02/48, International Monetary Fund. [Downloadable!]
    Other versions:
  9. Coate, Stephen & Knight, Brian, 2007. "Socially Optimal Districting: A Theoretical and Empirical Exploration," Working Papers 07-06, Cornell University, Center for Analytic Economics. [Downloadable!]
    Other versions:
  10. Amihai Glazer & Mark Gradstein, 2005. "Elections with contribution-maximizing candidates," Public Choice, Springer, vol. 122(3), pages 467-482, March. [Downloadable!] (restricted)
  11. Christoph Vanberg, 2004. "Funding Asymmetries in Electoral Competition: How important is a level playing field?," Public Economics 0402002, EconWPA. [Downloadable!]
  12. Stephen Coate, 2003. "Power-hungry Candidates, Policy Favors, and Pareto Improving Campaign Finance Policy," NBER Working Papers 9601, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Thomas Stratmann, 2003. "Tainted Money? Contribution Limits and the Effectiveness of Campaign Spending," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  14. Stephen Coate, 2001. "Political Competition with Campaign Contributions and Informative Advertising," NBER Working Papers 8693, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Panu Poutvaara & Tuomas Takalo, 2007. "Candidate quality," International Tax and Public Finance, Springer, vol. 14(1), pages 7-27, February. [Downloadable!] (restricted)
    Other versions:
  16. Meirowitz, Adam, 2006. "Electoral Contests," Papers 06-21-2007, Princeton University, Research Program in Political Economy. [Downloadable!]
  17. Stephen Coate & Brian Knight, 2005. "Socially Optimal Districting," NBER Working Papers 11462, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. Allan Drazen & Nuno Limão & Thomas Stratman, 2004. "Political Contribution Caps and Lobby Formation: Theory and Evidence," NBER Working Papers 10928, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Daniel Houser & Thomas Stratmann, 2006. "Selling Favors in the Lab: Experiments on Campaign Finance Reform," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  20. Zacharias Maniadis, 2009. "Campaign contributions as a commitment device," Public Choice, Springer, vol. 139(3), pages 301-315, June. [Downloadable!] (restricted)
  21. Elena Panova, 2007. "Congruence Among Voters and Contributions to Political Campaigns," Cahiers de recherche 0722, CIRPEE. [Downloadable!]
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