Impact of electoral competition, swing voters and interest groups on equilibrium policy platforms: Exploring the strategic forces at work

Abstract

This paper constructs a stylized model of election between two opportunistic candidates who can influence equilibrium policy platforms in exchange for monetary contributions provided by two distinct lobby groups. Two key features are embedded which give rise to a dual uncertainty in the model: the existence of partisan spread across voter groups as well as the embezzlement of campaign funds received by the electoral candidates from the interest groups. We derive and compare the equilibrium platforms of the two office-seeking candidates in three scenarios: none of the above uncertainties exist (benchmark case), only uncertainty about voters’ preferences exist (swing-voter case), and both the uncertainties exist (swing voters and lobby groups case). We find that an opportunistic candidate’s swing-voter tax platform is always lower than the benchmark tax platform. Additionally, the equilibrium tax choice of electoral contenders in the swing voters and opposing lobby groups case is found to be greater than the tax level chosen under the swing-voter case if the lobby group advocating a greater level of tax is sufficiently well-organized such that it outweighs the relative swing-voter effect in that group. Furthermore, we find that when an electoral candidate transitions from being highly corrupt to becoming relatively more honest, the equilibrium level of public good provision adjusts in conformity with the well-organized group’s economic preferences. Finally, if the strength of relative lobbying effect is weaker, a lower partisan bias within that group induces an electoral candidate to choose a tax platform closer to that group’s policy bliss point.