26 Pages Posted: 6 Feb 2003
It is often claimed that the accumulation of "war chests" by incumbents deters entry by high-quality challengers in Congressional elections. This paper presents a game-theoretic analysis of the interaction between an incumbent, potential challengers, an interest group, and a representative (rational) voter, where the incumbent's "quality" (or "legislative effectiveness") is known to the interest group, but not to the voter or to potential challengers. Under certain conditions, a perfectly revealing equilibrium exists; the incumbent signals her quality by raising funds from the interest group to accumulate a war chest. The entry deterrence effect thus operates solely through the role of war chests in signaling incumbent quality.
Suggested Citation: Suggested Citation
Dharmapala, Dhammika, Campaign War Chests, Entry Deterrence, and Voter Rationality. Economics and Politics, Vol. 14, pp. 325-350, 2002. Available at SSRN: https://ssrn.com/abstract=342556
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