DP5913 Politician Preferences and Caps on Political Lobbying
|Author(s):||Tuvana Pastine, Ivan Pastine|
|Publication Date:||November 2006|
|Keyword(s):||all-pay auction, campaign finance reform, explicit ceiling|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=5913|
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.