IDEAS home Printed from https://ideas.repec.org/p/tiu/tiutis/f8eafa82-fa74-4556-a34d-0bc45b53e8df.html
   My bibliography  Save this paper

Campaign Advertising and Voter Welfare

Author

Listed:
  • Prat, A.

    (Tilburg University, School of Economics and Management)

Abstract

This paper investigates the role of campaign advertising and the opportunity of legal restrictions on it. An electoral race is modeled as a signalling game with three classes of players: a continuum of voters, two candidates, and one interest group. The group has non-verifiable insider information on the candidates' valence and, on the basis of this information, offers a contribution to each candidate in exchange for a favorable 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 should be prohibited).
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Prat, A., 1997. "Campaign Advertising and Voter Welfare," Other publications TiSEM f8eafa82-fa74-4556-a34d-0, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:f8eafa82-fa74-4556-a34d-0bc45b53e8df
    as

    Download full text from publisher

    File URL: https://repository.tilburguniversity.edu/bitstreams/68f206cd-f096-427b-bda4-c8790b4c1768/download
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gary S. Becker & Kevin M. Murphy, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 941-964.
    2. 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.
    3. 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.
    4. 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.
    5. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
    6. Baron, David P., 1994. "Electoral Competition with Informed and Uninformed Voters," American Political Science Review, Cambridge University Press, vol. 88(1), pages 33-47, March.
    7. 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.
    8. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 265-286.
    9. 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.
    10. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    11. 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.
    12. Becker, Gary S. & Murphy, Kevin M., 1990. "A Simple Theory of Advertising as a Good," Working Papers 58, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    13. Bagwell, Kyle & Ramey, Garey, 1994. "Coordination Economies, Advertising, and Search Behavior in Retail Markets," American Economic Review, American Economic Association, vol. 84(3), pages 498-517, June.
    14. Elhanan Helpman & Gene M. Grossman, 1999. "Competing for Endorsements," American Economic Review, American Economic Association, vol. 89(3), pages 501-524, June.
    15. Austen-Smith, David, 1995. "Campaign Contributions and Access," American Political Science Review, Cambridge University Press, vol. 89(3), pages 566-581, September.
    16. David P. Baron, 1989. "Service-Induced Campaign Contributions and the Electoral Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(1), pages 45-72.
    17. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
    18. Lohmann, Susanne, 1994. "Information Aggregation through Costly Political Action," American Economic Review, American Economic Association, vol. 84(3), pages 518-530, June.
    19. Kyle Bagwell & Garey Ramey, 1994. "Advertising and Coordination," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(1), pages 153-171.
    20. Lopez, Rigoberto A & Pagoulatos, Emilio, 1996. "Trade Protection and the Role of Campaign Contributions in U.S. Food and Tobacco Industries," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 237-248, April.
    21. Cukierman, Alex, 1991. "Asymmetric Information and the Electoral Momentum of Public Opinion Polls," Public Choice, Springer, vol. 70(2), pages 181-213, May.
    22. Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-450, June.
    23. 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.
    24. Rebecca Morton & Charles Cameron, 1992. "Elections And The Theory Of Campaign Contributions: A Survey And Critical Analysis," Economics and Politics, Wiley Blackwell, vol. 4(1), pages 79-108, March.
    25. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    26. David Austen-Smith, 1987. "Interest groups, campaign contributions, and probabilistic voting," Public Choice, Springer, vol. 54(2), pages 123-139, January.
    27. Mark N. Hertzendorf, 1993. "I'm Not a High-Quality Firm -- But I Play One on TV," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 236-247, Summer.
    28. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 465-491.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Prat, Andrea, 2002. "Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies," Journal of Economic Theory, Elsevier, vol. 103(1), pages 162-189, March.
    2. Nils‐Henrik M. von der Fehr & Kristin Stevik, 1998. "Persuasive Advertising and Product Differentiation," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 113-126, July.
    3. Soberman, David A. & Xiang, Yi, 2022. "Designing the content of advertising in a differentiated market," International Journal of Research in Marketing, Elsevier, vol. 39(1), pages 190-211.
    4. Nick Vikander, 2011. "Targeted Advertising and Social Status," Tinbergen Institute Discussion Papers 11-016/1, Tinbergen Institute.
    5. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, July.
    6. 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.
    7. Ulrich Doraszelski & Sarit Markovich, 2007. "Advertising dynamics and competitive advantage," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 557-592, September.
    8. McCarthy, Ian M., 2016. "Advertising intensity and welfare in an equilibrium search model," Economics Letters, Elsevier, vol. 141(C), pages 20-26.
    9. Thomas de Haan & Theo Offerman & Randolph Sloof, 2015. "Money Talks? An Experimental Investigation Of Cheap Talk And Burned Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1385-1426, November.
    10. Lola Esteban & José M. Hernández & José Luis Moraga‐González, 2006. "Customer Directed Advertising and Product Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 943-968, December.
    11. Oskar Nupia & Francisco Eslava, 2022. "Campaign finance and welfare when contributions are spent on mobilizing voters," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 58(3), pages 589-618, April.
    12. Moraga-Gonzalez, Jose Luis, 2000. "Quality uncertainty and informative advertising," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 615-640, May.
    13. Stephen Coate, 2003. "Power-hungry Candidates, Policy Favors, and Pareto Improving Campaign Finance Policy," NBER Working Papers 9601, National Bureau of Economic Research, Inc.
    14. Reuben E., 2002. "Interest groups and politics: The need to concentrate on group formation," Public Economics 0212001, University Library of Munich, Germany.
    15. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    16. Christou, C. & Vettas, N., 2008. "On informative advertising and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 92-112, January.
    17. Bharat Anand & Ron Shachar, 2009. "Targeted advertising as a signal," Quantitative Marketing and Economics (QME), Springer, vol. 7(3), pages 237-266, September.
    18. Ulrich Doraszelski & Sarit Markovich, 2004. "Advertising Dynamics and Competitive Advantage," Computing in Economics and Finance 2004 61, Society for Computational Economics.
    19. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2018. "Deceptive Advertising with Rational Buyers," Management Science, INFORMS, vol. 64(3), pages 1291-1310, March.
    20. Régis Chenavaz & Sajjad M. Jasimuddin, 2017. "An analytical model of the relationship between product quality and advertising," Post-Print hal-01685892, HAL.

    More about this item

    JEL classification:

    • 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
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tiu:tiutis:f8eafa82-fa74-4556-a34d-0bc45b53e8df. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Richard Broekman (email available below). General contact details of provider: https://www.tilburguniversity.edu/about/schools/economics-and-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.