Competing Informed Principals & Representative Democracy

[Job Market Paper]

Abstract

This paper studies the welfare implications of politicians who assume either the role of delegates or trustees in a representative democracy.  We identify conditions under which the latter is preferable to the former.  In this model, voters are uninformed about the value of a policy-relevant state.  Two informed politicians compete for votes by committing to state-contingent policy platforms that may or may not reveal information about the underlying state.  After the election, the winning politician announces the state and implements the relevant policy.

We find that if voters’ policy preferences are not too sensitive to changes in the state, then the two politicians offer divergent policy platforms.  In addition, our main result characterizes Perfect Bayesian Equilibria in which the offered platforms are non-revealing menu contracts, and the resulting welfare is higher than in any separating equilibrium.  Such is the case when voters are sufficiently valence-driven and direct benefits to politicians are sufficiently important.  The result provides a welfare explanation for why voters may defer policy choices to an elected representative, rather than select a politician that reflects their policy preferences based on information revealed in political competition.

[pdf file]