Working Paper: CEPR ID: DP5913
Authors: Tuvana Pastine; Ivan Pastine
Abstract: This paper extends Che and Gale (1998) by allowing the incumbent politician to have a preference for the policy position of one of the lobbyists. The effect of a contribution cap is analyzed where two lobbyists contest for a political prize. The cap always helps the lobbyist whose policy position is preferred by the politician no matter whether it is the high-valuation or the low-valuation contestant. In contrast to Che and Gale, once the cap is binding a more restrictive cap always reduces expected aggregate contributions. However, the politician might support the legislation of a barely binding cap. When politician policy preferences perfectly reflect the will of the people, a more restrictive cap is always welfare increasing. When lobbyist's valuations completely internalize all social costs and benefits, a cap is welfare improving if and only if the politician favors the high-value policy. Even a barely binding cap can have significant welfare consequences.
Keywords: All-pay auction; Campaign finance reform; Explicit ceiling
JEL Codes: C72; D72
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Politician's preference for a lobbyist's policy position (D72) | Expected contributions from that lobbyist (D72) |
| A binding contribution cap (F38) | Competitive dynamics between lobbyists (D72) |
| More restrictive cap (D45) | Expected aggregate contributions among both bidders (D44) |
| Politician's preferences align with public will (D72) | Welfare implications of contribution caps (D69) |
| Barely binding cap (Y20) | Welfare effects of contribution caps (D69) |