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Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies

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  • Prat, A.

    (Tilburg University, School of Economics and Management)

Abstract

I introduce a microfounded model of campaign finance with office-seeking politicians, a continuum of voters, and a large number of heterogeneous lobbies. Lobbies make contributions to politicians according to a common agency framework. Politicians use contributions to finance their electoral expenditures. Voters are not fooled by electoral expenditures: they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians. The model is used to: (i) determine the relation between campaign spending and political deadweight; (ii) show the informational value of lobbies' contributions; (iii) evaluate the welfare implications of restricting campaign spending; and (iv) interpret the empirical finding that campaign expenditures have a very low effect on election outcome. One can say that this model makes the best case in favor of campaign contributions. Nevertheless, under reasonable parameter values, a ban on campaign contributions is welfare-improving.
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Suggested Citation

  • Prat, A., 1998. "Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies," Other publications TiSEM 30b6424e-efe1-48c7-9709-7, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:30b6424e-efe1-48c7-9709-713f2669d6c9
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    More about this item

    JEL classification:

    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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