Professional Documents
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Electoral Competition and Special Interest Politics
Electoral Competition and Special Interest Politics
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Reviewof EconomicStudies(1996) 63, 265-286 0034-6527/96/00120265$02.00
?) 1996The Reviewof EconomicStudiesLimited
1. INTRODUCTION
Specialinterestgroupsappearto wield considerableinfluenceover public policy in many
representativedemocracies.The trade policies of many industrializedcountries favour
vested interestsin the clothing, textile, and heavy industries.Their agriculturalpolicies
give various forms of income supportto farmers.Health and safety measuresshow the
imprimaturof the local insuranceindustryon the one hand,and of powerfullabourunions
on the other. And manufacturershave had much to say about a myriadof environmental
and regulatorypolicies. It seems difficultto argue that the political process serves only
the interestsof the medianvoter.
Interestgroups pursue their quest for political advantageby a numberof different
means. They gather informationthat supportstheir positions and make it availableto
powerfulpoliticians.They take their argumentsto the public in an effort to win voter
sympathy.Sometimesthey undertakedisruptiveactivities,which are intendedto coerce
ratherthan persuade.And, of course,they contributeto politicalpartiesand to individual
candidates'campaigns.
This paperfocuses on interestgroups'use of campaigncontributionsas a vehiclefor
influencingpublic policy. Contributionsmay take the form of cash transfersor gifts in
kind. In any event, we assume that the contributionscan be used by the candidatesto
persuadeand cajole a group of undecidedvoters. Our aim is to characterizethe policies
thatemergewhenrivalgroupsvie for the politicians'favourwhilethe politiciansthemselves
compete for voter support.
The literatureon campaigngiving identifiestwo motives that interestgroups might
have when they contribute to politicians or to political parties. Contributorswith an
electoral motive intend to promotethe electoralprospectsof preferredcandidates.Those
265
266 REVIEW OF ECONOMICSTUDIES
2. RELATED LITERATURE
Thereis, of course,a vast literatureon policy determinationin representativedemocracies.
Our goal in this section is to explain the relationshipof our paper to some others that
have a similarfocus. We make no claims to comprehensivecoverage.
1. Admittedly,the distinctionbetweenthe pliablepoliciesand othersis not alwaysclearcut. In the long-
run,all of a party'spositionsare presumablysubjectto change.But candidatesand partiesare willingto change
theirpositionson some issuesmore freelythan others.The set of pliablepolicy issuesmightincludeallocation
of "pork-barrel"spending,attitudeson gun control and some environmentalquestions,and positions on a
varietyof economicpolicies.
GROSSMAN & HELPMAN ELECTORALCOMPETITION 267
3. THE MODEL
We examine a jurisdictionwith two political parties, an exogenous number of special
interestgroups, and a fixed continuumof voters. Our descriptionbeginswith the voters.
have a stake in the same policy component. If the membersof a group share identical
preferencesconcerningthe issues wherepoliticiansare willing to be flexible,then Wj(p)
is simply the numberof membersof interestgroupj times the utility componentof the
representativeone. In any event, we assume that the members of an interest group
cooperate fully in their collective action, and so seek to maximizetheir expectedjoint
welfarefrom the pliablepoliciesnet of campaigncontributions.LettingCjK representthe
contributionof interestgroupj to party K, we write the objectivefunctionfor this group
as
V1= (0(s)W(pA) + [1- ((s)] Wj(pB)BCfC_BC (2)
If an interestgroup hopes to influencea party'spolicy endorsement,it must make
sure that the partysees a connectionbetweenits platformand the size of the contribution
that will be forthcoming.The group need not announcean explicitquidpro quo; indeed,
the publicmightfrownupon politicianswho openlypeddletheirpoliticalinfluence.Rather,
the interestgroupneeds only convey an understandingthat its contributionwill vary with
the positions that is taken. We would argue that politiciansunderstandthis connection
quite well; in the U.S., proponentsof gun control do not, for example,expect to receive
donationsfrom the National Rifle Association.
We allow the interestgroups considerablefreedom in designingtheir contribution
schedules,cf(pK). We assumeonly that the schedulesare continuous,differentiablewhen
positive, and everywherenon-negative.The latter means that interestgroups can offer
resourcesto the partiesor withhold them, but cannot levy taxes on politicians.A group
can, of course, choose to make its contributionindependentof policy; in this way it can
bolster the chances of its favourite party without causing it to lose any (additional)
informedvotes. A group also might choose to offer its support to only one of the two
politicalparties.
and
1-a
s= 1 a IA(' F [u'(ji) - ui(P
p)Idi
Here, conditions (a) and (b) express the Nash equilibriumamong parties in the policy
announcementphase, while condition (d) ensuresthat no lobby can beneficiallydeviate
duringthe initial stage of the game.
Implicitin DefinitionI is the assumptionthat each partycan observethe contribution
schedulesofferedto the other. This assumptioncan be justifiedwith the observationthat
the "schedules"here are intended as metaphors,rather than as literal descriptionsof
explicit contracts. In practice,offers of political support are conveyed as much by the
public posture of a lobby as by any privatecommunicationsit may have with the poli-
ticians. Accordingly,the quidpro quo for campaignsupport may come to be common
knowledgeamong the parties.'0
3.5. Functionalforms
To simplifythe analysis,we adoptparticularfunctionalformsfor the distributionfunction,
F( ), and for the effectiveness-of-campaign-spending function, H( ). We assume that
informedvoters' relativepreferencesfor the immutablecharacteristicsand programmeof
party B are distributeduniformlyin the range
( -b 'b I
2f f '2f '
10. If, instead,we were to allow the contributionschedulesto be communicatedprivatelyto the parties,
then each partywould be forced to conditionits policy choices on its beliefsabout the offersthat had been
made to its rival. As O'Brienand Shaffer(1992) have arguedin a relatedcontext, such a game has many
subgame-perfect beliefsof the parties.Still,
Nash equilibria,as thereis little to disciplinethe out-of-equilibrium
therewouldbe two reasonsto focus on the equilibriathat satisfyour Definition1. First,evenwith unobservable
contributionschedules,theseequilibriaarethe only ones thatcan arisewhenF( ) and H(- ) are linearfunctions,
as we shallassumein the next sub-sectionand thereafter.Moreon this point in a moment.Second,the equilibria
describedby Definition1 are immuneto joint-welfare-increasing bilateralrenegotiationbetweena lobby and a
party, and thus satisfythe conditionsfor a "contractequilibrium"proposedby Cremerand Riordan(1987).
See O'Brienand Shaffer(1992) for a discussionof why such equilibriamight be focal in the set of equilibria
that can arisewhen contractsbetweena principaland a particularagent are unobservableto otheragents.
GROSSMAN & HELPMAN ELECTORALCOMPETITION 273
1 ~~A B for -
PB C Ib
--+b+ f[ui(p )-u'(p foru'(pA)
2 -
fI '2fx, f
We also take H( ) to be linear and of the form H(CA - CB) =+b+h(CA - CB), where
h >0 is a parameterreflectingthe productivityof campaignspending.With this specifi-
cation, if the two partieshappento endorsethe same pliablepolicies and if they happen
to spend the same amounts on their campaigns,then party A will capture a fraction
+ b of the votes. The parameterb can be interpretedas the ex ante voter bias in favour
of party A. We might expect b > 0 if party A is the incumbentparty and b < 0 if party B
is the incumbentparty. Such an incumbencyadvantagecould reflectname recognition
and perhapsthe feelingthat "the devilyou know is betterthan the devilyou don't". Also,
b might differfrom zero because one party'scandidatesare seen as more competentor
becauseits ideologicalagendahas greaterpublic appeal.When b = 0, we will say that the
parties are equally popular.
One consequenceof linearity(among others) is that the objectivefunctionfor each
partybecomesadditivelyseparablein the variablesdescribingits own policy platformand
level of campaign spending, and those of its rival. With separability,each party can
make its decisionsabout what contributionoffers to accept and what platformto adopt
independentlyof its knowledgeor beliefs about the incentivesfacing the other. Accord-
ingly, the equilibriathat arisewhen contributionschedulesare observableto both parties
coincidewith those that can arise when the schedulesare communicatedprivately,in the
linearcase.
Proposition 2. If b > 0 and the contributionsfrom a sole lobby satisfy the par ticipation
constraintsin (3) with equality, then Wj(pA)> Jy(pB) W(pA) < W(pB), and CA> CB.
The propositionfollows straightforwardly from (3) and (4).14 Notice first that b>O
implies (p(b+ 2) > 1 - (p(b+ -). Therefore,it is the more popularparty that appliesgreater
12. Let d be the marginaldamagecausedby a unit of the industry'soutputand let tK be the per-unittax
advocated by party K. Then in political equilibrium, tK=d- [(TKah)/(I - a)f J(x/x'), where x is industry output
and x' is the slope of the industrysupplycurve.
13. Let F(K, L) be the aggregateproductionfunction.The minimumwage wK supportedby party K
maximizesqKwL + ((1 - a)f )/ahF(K, L), subjectto the constraintsthat L ? L and FL(K,L) = w. The solution
has a minimumwage above the market-clearing wage providedthat
ah (P
E<
ah,K+ (1 - a)f'
wheres -FL/LFLL is the elasticityof labourdemand.
14. P10oof: From (4) we have Kj (pK) + a W(pK) > KW. (pL) + a W(pL) for L # K; K, L = A, B and
3 =(1 - a)f/ah. These inequalities imply: (i) (A - B) v(PA) > (A - B) W,(p) and (ii)
S[W(p) )- W(pL)]I>vK[ WJ() )- Wj(p ). For A> T, condition (i) implies Wj(pA) > W,(pB), which combined
with (ii) for K= B, implies W(pB)> W(pA). Finally, when (3) holds as an equality for K=A and K=B,
W(p) > W(pA) implies CA> CR.
276 REVIEW OF ECONOMICSTUDIES
weight to the welfareof the special interestgroup in setting its flexiblepolicy positions.
In other words, the lobby inducesthe party whose candidatesand fixed programmehave
greaterpublic appealto choose a platformof pliablepoliciesthat is closer to the lobby's
ideal.'5 But then this party's platform must be further from the ideal of the average
(informed)vector. The latter fact, togetherwith (3), implies that the lobby contributes
more to the party with the better election prospects.The last observationis in keeping
with Snyder's(1990) view of political contributionsas investmentsin contingentclaims
(the claims pay off only if the recipientsend up in a position to influencepolicy), a view
which he supportswith evidenceon campaigngifts to candidatesfor the U.S. House of
Representatives.
The following propositionindicateshow the platformsthat arise in an equilibrium
with influence-motivated contributionsrespondto the parametersdescribingthe political
environment.16
15. This result is at odds with one derivedby Baron (1994). Baron establishesthat, in his model, a
candidatewith an incumbencyadvantage"canaffordto be more independentof interestgroups",whereasthe
challengerwith worseelectionprospectscatersmore to specialinterests.Whendiscussingparticularistic policy
positions, Baron assumesthat the interestgroupscontributea fixed portion of the benefitsthey derivefrom
politicians'favours.He modelsincumbencyadvantagealternativelyas a biasin the votingpatternof uninformed
voters (only) and as the abilityof a candidateto delivergreaterbenefitsto interestgroupsfor a given burden
to the electorate.When it is the former,the incumbentanywaycapturesmore of the votes of the uninformed
for a givenamountof campaignspendingand so devotesmoreefforton the marginto attractingthe informed
voters. Whenit is the latter,the incumbentanywayattractsgreatercampaigncontributionsfor a given policy
stance,and so againattemptsto appealmoreto the informedvoterson the margin.In our model,the popularity
advantageappliesequallyto the behaviourof informedand uninformedvoters, neithercandidatecan reward
the interestgroup without at the same time harmingthe generalpublic,and the interestgroup chooses how
muchto contributeto the parties.In suchcircumstances,an interestgroupwill wish to investmorein the party
that is more likelyto be in a positionto set policy and so will exerta greaterinfluenceon its platform.
16. The proof of this propositionis similarto the proof of Proposition2.
17. Dixit and Londregan(1994) find similarlythat transferpoliciestend to favourgroupsof votersthat
have "central"views on ideologicalissues and thus many memberson the marginof indifferencebetweenthe
two candidates.
GROSSMAN & HELPMAN ELECTORALCOMPETITION 277
Proposition 4. Let party A be the morepopular party (i.e. b > O). Then (a) the partici-
pation constraint (3) is satisfied with equality for party B; and (b) if the participation
constraint (3) is satisfied as a strict inequality for party A, then Wj(pA)> j(pB)
W(pA)< W(pB) and CA > CB.
Notice that Propositions(2) and (4) imply that the more popularparty amassesgreater
campaignfunding and adopts a platformmore favourableto the special interestgroup
and less considerateof the averagevoterirrespectiveof whetherthe interestgroupchooses
to satisfy the participationconstraintwith equalityor not.
If the lobby does give to the more popularparty in excess of what is neededto gain
its acquiescence,the motivationwould be to help that party captureadditionalseats in
then its platformsatisfies(4), but with
18. If (3) holds as an equalityfor party B, for examp?le, pB=
(A
-b +-(I-a )ahC +(t-a)fW(p*). Then W,(p )+3W(p )>pBW,(pA)+3W(pA), where
6 _af/(1 - a)h. This, togetherwith W,(pA)> Wj(pB), implies W(pA)< W(pB). Moreover,if (3) holds as an
equality for party B and as an inequality for party A, we have CA> CB+ 6[ W(pB) - W(pA)J, which together
with W(pA) < W(pB) implies CA> CB.
278 REVIEW OF ECONOMIC STUDIES
the legislature.By doing so, the lobby could increasethe probabilitythat its preferred
platformwould be implemented.Suppose that party A is the more popular party, and
supposethat the lobby contemplatesgivingthis partya bit more than is neededto induce
the party to choose the policypA. The expectedmarginalbenefitfrom the first dollar of
"extra" contribution is qp(s)ah[ W(pA)- ty(pB)], which reflects the group's preference
for A's platform and its marginaleffect on the probabilitythat this platform will be
implemented.The marginalcost of the extracontributionis of courseequal to one. Thus,
we have
+V , (pr
(&)VW =(0 ) fW(pA) + VCi4 (pA) (8)
ah
and
[I_ P(j)V B a_ _
[1~~~~
f(/). p/) w(p/B) + VC! (p1B)
= O (9
ah
Now look at the problemfrom the politicians'perspective.When confrontedwith
the full set of contributionschedules,the politicalpartiesset theirplatformsto maximize
their sharesof the vote. The first-orderconditionsfor these maximizationsimply
(1-a)fW(pK) + ahVCK(pA)=0 for K=A, B, (10)
where CK(pK) i- c/((pK) is the aggregate contribution schedule confronting party K.
In words,the partiesbalancethe marginalloss of informedvotes causedby theirdeviating
fromp* againstthe additionaluninformedvotes they captureby spendingthe extradona-
tions from the interestgroups.
In the equilibrium,the platformsanticipatedby each lobbymust be the same as those
actually announcedby the parties; i.e. p =pK for all / and for K=A, B. Therefore,we
can combine (8), (9), and (10) to derive
q({ )V WI(PA) = VCIA(pA); (11)
Lemma 1. If all lobbies set contributionschedules that are everywhere continuous and
differentiable wherepositive, and if all lobbies satisfy the participation constraints (7) with
equality, then the contribution schedules C/ ( ) for lobby 1 must be locally truthful (i.e.
satisfy (1 1) and (12)) when evaluated at the equilibriumpolicies pA and pB.
19. See Grossmanand Helpman(1994) for furtherdiscussionof local truthfulnessand its relationto
"globaltruthfulness",as definedby Bernheimand Whinston(1986).
280 REVIEW OF ECONOMIC STUDIES
These conditionsimply:
Proposition 6. Whenall lobbies satisfy the participation constraints (7) with equality,
each party's equilibriumplatform satisfies the necessary conditionsfor maximizing a weighted
sum of the aggregate welfare of all interest group members and the average welfare of
informed voters.
expectationsare based on the belief that the other lobbies will give more generouslyto
party B than to partyA. Then each lobby will be welljustifiedin concentratingits efforts
on influencingB's platformand, in the end, theirexpectationsmay be validated.Whereas
an only lobby can alwaysgain by ensuringthat the more popularpartywins the majority
of the seats, a lobby that is one among many cannot necessarilydo so. To reversethe
fortunes of the two parties in a way that conserves resources,it may need the tacit
cooperationof other lobbies.
The potential for multiplicityof equilibriacan also be understoodin anotherway.
Recall that s= 2+ b + (I - a)f[ W(p,) -W(p%,)] + ah[C_4 (pig,)-Ci,(p%)] when lobby /
makes the minimalcontributionsneededto induce the platformsPAo andpBo. Of course,
if all lobbies give minimally,then this condition must hold for each one. The policies
A P
p,1
andp% are the ones that the partieswould choose if they ignoredthe offerfrom lobby
1. Notice that these policies depend on the shapes of the lobbies' contributionschedules
awayfrom the equilibrium. And whilethe equilibriumrequirementsplace some restrictions
on the global shapes of these schedules(for example,
must be the same for all 1) the requirementsare not enough to pin down the equilibrium
uniquely.
Still, some of the Nash equilibriamay be more compellingthan others.For example,
if b = 0, the symmetricequilibrium-in which the lobbies treat the parties similarlyand
the election yields an evenly split legislature-may be focal. If b >0, the lobbies would
have no particularreason to expect the bulk of the contributionsto go to party B, and
in some cases they will have good reasons to expect the opposite. One such case arises
when all lobbies are offeringpositivecontributionsto both parties,not only in the neigh-
bourhood of the equilibrium,but also around the variouspoints that the partieswould
choose if one of the lobby groups were to be ignored.In this situation, the equilibrium
with s <- is Pareto dominatedfor the entireset of interestgroups by anotherwith s >
The alternativeequilibriumcan be constructedas follows. Let each lobby offer to party
B in the new equilibriumexactlywhat it offeredto partyA in the old. Let each construct
its new offer to party A by subtractinga fixed amountfrom the (positive) offersto party
B in the old equilibrium,plus an additionalamountthat increaseswith the distancefrom
the initialpBo. Finally,let the fixed reductionsbe chosen so that partyA capturesas many
seats in the new equilibriumas party B did in the old, and let the additionalreductions
be chosen so that no partywill declinethe offerfrom some lobby in settingits platform.2'
The newlyconstructedcontributionschedulesare best responsesto one another,and they
induce each party to chose the platformin the new equilibriumthat the other chose in
the old. Finally, since each party wins as many seats in the new equilibriumas the other
did in the old, the new equilibriumhas exactly the same distributionof policy outcomes
as the old. It follows that all interestgroupsgain.
21. That is, let C,K(p) be the initialscheduleofferedby lobbyj to partyK and let C/K(p)be the alternative.
We propose Co`(p)= CA(p) for all] and CjA(p)= CjB(p) - z, (p-p), whereeach Z,() is a functionthat is
everywherenon-negativeand that reachesa uniquemaximumat 0. Let the constantszj be chosenso that z.>O
and j, zj= 2b/a h, and the functionsZj() so that
, ((I- a)f W(p) + ah E
(I - a)f W(Mp)+ j C8( p) > maxp [C(p)
Zi(p-p?]
- - aiz,}
for all 1.This will be possible,providedthat the Cj (p%)in the initialequilibriumare largeenough.In the event,
party A chooses the platformpA =pB, party B chooses pJ=pA, and lobby I gains z1 relativeto the initial
equilibrium.
282 REVIEW OF ECONOMIC STUDIES
More generally,anytimeb >0 and s <, the lobbies are paying excessivelyto allow
the less popular party to capture a majorityof the seats. It is never in their collective
interest to do so. But it may not always be possible to devise alternativecontribution
schedulesthat allow each to pay a smallercontributionwhile preservingthe probability
distributionover policy outcomes.If it is not possibleto do so, thena Paretoimprovement
may not be availablewithin the set of Nash equilibria.In such cases the realizationof
joint gains may requirethe enforcementof an explicitlycooperativearrangement,where
some lobbies agree to some political actions that are not best responsesto the others
and where certain of the interest groups receive transfersas side paymentsunder the
agreement.22
Let us now examinewhethersome interestgroupswould opt to give to theirfavourite
partiesbeyondwhat is neededto influencetheirplatforms.We firstestablishthe following
proposition,indicatingthat at most one lobby groupcan perceivean electoralmotive for
contributingto a given party.
Proposition 7. For each political party K= A, B, there is at most one lobby (gener-
ically) that satisfies the participation constraint (7) as a strict inequality.
Supposeto the contrarythat lobbies I and 2 each gave extra contributionsto party A in
order to bolster its election returns.Then, in equilibrium,the marginalbenefitperceived
by lobby j for contributing to this party would be (p'(s)ah[WJ(pA) - 4j(pB)]g forj= 1, 2,
while of course the marginalcost for each would be 1. Both lobbies could satisfy their
first-orderconditions for optimal giving only if WI (PA) - WI (pB) happened to equal
W2 (NA) - W2 (pB); that is, if the two lobbiesheld exactlythe same absolutepreferencefor
partyA's pliablepoliciesover those of party B. Electoralsupportbeyondwhat is justified
by the influencemotive constitutesa publicgood for all interestgroupspreferringa given
party's platform.As in many other contexts, it is only the player that has the most to
gain that might contributevoluntarilytoward the purchaseof a public good.
The electoralmotive might be operativefor a lobby if it stands to gain greatly by
havingone party'splatformimplementedratherthan the other's.But if all interestgroups
are "small",in a sense made precisein the next proposition,then none will see a marginal
benefitof "excess"contributionsequal to their marginalcost. In this case, all campaign
giving is governedby an influencemotive alone.
from giving a little bit more to party A, and (p'(s)ah[ Wj(pB) - 4/(pA)] from giving a little
more to party B. If the inequalityin the propositionis satisfied,it will not wish to give
the extraamountto eitherparty,in view of the marginalcost of the additionalcontribution
22. We suspectthat any equilibriumthat has the less popularcandidatewinninga majorityof the seats
will not be a coalition-proofequilibrium(see Bernheimet al. (1987)). But we have not been able to provethis
for all types of equilibria.
GROSSMAN & HELPMAN ELECTORALCOMPETITION 283
of 1. The interpretationof this in termsof the sizes of the groups is as follows. Suppose
we start with a given set of interestgroupmembersand then dividethese individualsinto
a larger and larger numberof (smaller)lobbies, using any allocation of individualsto
groups at all. When the numberof differentgroups is largeenough, Wj(p) will be small
for everyj, and so will the difference IWj(p) - Wy(pB)j. In the event, the electoral motive
for campaigngiving vanishes, but the influencemotive remains.Indeed, (13) and (14)
continue to characterizethe equilibriumplatformsno matter how finely the groups are
divided,so long as the participationconstraintsbind for each one.
6. SUMMARY
Interestgroups make campaigncontributionseither to influenceelectionoutcomesor to
influencepolicies.We have developeda model of campaignfinancein whichspecialinter-
ests may have eitheror both of thesemotivesfor giving.In the model, the specialinterests
tailor schedulesthat link campaigngifts to policy endorsements.The schedulesare pro-
posed to two political parties,who are vying for seats in a legislature.The partieshave
fixed stanceson some issues but have yet to announcetheir positions on other "pliable"
policies, about which they have no inherentpreferences.Confrontedwith offersfrom the
variousinterests,the partiesannouncetheircampaignplatforms.They tradeoff the extra
campaigncontributionsthat may be forthcomingif they cater to the groups' demands
against the votes that this may cost them among the well-informedsegment of the
electorate.
The paperanalysesthe equilibriumof a two-stagegame.In the firststage, the interest
groupsstrategicallydesigntheircontributionschedulesto maximizetheirexpectedwelfare
net of political pay-outs. In the second stage, the partieschoose platformsto maximize
their representationin the legislature.In the voting booth, an informedvoter casts her
ballot for the partywhosecandidatesand platformshe prefers.In contrast,an uninformed
(or, perhaps,impressionable)voter may respondto campaignrhetoric.The differencein
policies and spendinglevels determinesthe election outcome, which in turn decides the
probabilitythat each party'splatformwill be implemented.
Our model predictsdivergencein policy platforms.The party that is expectedto win
the majorityof the seats garnersgreaterattentionfrom the specialinterests.As a result,
it is inducedto adopt a platformthat gives more weightto theirconcerns.The underdog
party also caters somewhatto the special interests,but its equilibriumplatformis closer
to the bliss point of the averageinformedvoter. This findingmay have relevancefor the
debate over term limits. With the advantagethat incumbencybrings in terms of name
recognitionand reputation,incumbentsare overwhelmingfavouritesin many elections.
Our analysis suggeststhat these candidatesmay convert their popularityinto campaign
war chests,with detrimentaleffectson the welfareof the averagevoter. Termlimitswould
periodicallyrestorea more even election,and thus might diminishthe influenceof special
interestgroups.
When interestgroups offer the parties contributionsthat are platform contingent,
they induce in them a preferenceorderingover the pliable policies. In our model, these
preferencestake a particularlysimpleform. Each party is inducedto behaveas if it were
maximizinga weightedsum of the welfarelevelsof two groupsin the polity.The aggregate
interestof informedvotersreceivesa weight that increaseswith the share of such voters
in the voting population and decreaseswith the diversityof their opinions about the
relativedesirabilityof the parties'ideologicalpositions.The aggregateinterestof members
of organizedinterestgroups receives a weight that increaseswith the susceptibilityof
284 REVIEW OF ECONOMICSTUDIES
A'_ ui(pA) - u'(pB) and AC=CA- C.23 PartyA wins the electionwith (approximate)probability
2
r(pA, pB, AC)=N( Z16iF(Ai) +anH(Ac)- (15)
,XZiIF(A')[1- F(A') + anH(Ac)[l -H(Ac)1I
where we have made use of the fact that 7r(p', p', 0) =2 at the symmetric equilibrium.24
PartyA chooses its equilibriumplatform,pAo to maximizer[pA, pB?, CAo(pA) C"?(p?)] Againmaking
use of the symmetryconditions,PA, =pB =p and CAo(-)= C?( )=Co( ) this implies
(I - a)fV W(p?)+ ahVCO(p?)
=O. (17)
Consistencyrequiresp7=po for all 1. Thus, (16) and (17) imply
The platformpo that satisfies(19) is the same as the platformpA, that satisfies(13) and the platformp8'
that satisfies(14), when s0=2. We see that, with equal popularity,the platformthat emergesin a symmetric
equilibriumwhen the legislatureoperatesby strictmajorityrule and partiesmaximizetheirchancesof winning
a majorityis the same as the platformthat emergesin symmetricequilibriumwhen partiesmaximizetheir
representationin the legislatureand a minorityplatformhas some chanceof beingimplemented.25
23. The approximationfollows from the Liapunovcentral limit theorem,which requiresalso that the
variancetermbecomesunboundedas n growslarge.For a discussionof the applicabilityof this theoremin the
contextof a probabilisticvoting model, see Lindbeckand Weibull(1987).
24. In deriving(16) we haveusedthe first-orderconditionwithrespectto CAto substituteout the Lagrange
multiplieron the participationconstraint.We have also made extensive use of the symmetryconditions,
0 A.RC;
P1Ao==pi
Bo=.
pi and C, = C/ = C?
25. This resultmimicsa similarfindingby Lindbeckand Weibull(1987), who assumedthat all votersare
informedvotersand that campaigncontributionsplay no role in the election.
286 REVIEW OF ECONOMIC STUDIES
PrincetonUniversity.Part of this work was carriedout while the authorswere visitingI.G.I.E.R. in Milan,
Italy and the EuropeanUniversityInstitutein Florence,Italy, Needless to say, these were very hospitable
environments.
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