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Campaign advertising and voter welfare

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This paper investigates the role of campaign advertising and the opportunity of legal restrictions on it. An electoral race is modelled 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 favourable 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).

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en

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http://eprints.lse.ac.uk/5218/

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