Working Paper: CEPR ID: DP2152
Authors: Andrea Prat
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).
Keywords: Elections; Campaign Contributions; Advertising; Voter Welfare; Split Contributions
JEL Codes: D72; D82; M37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Interest group contributions (D72) | Candidate policies (D79) |
| Candidate policies (D79) | Voter welfare (K16) |
| Interest group contributions (D72) | Voter welfare (K16) |
| Ban on campaign advertising (K16) | Voter welfare (K16) |
| Split contributions (D64) | Voter welfare (K16) |