Electoral competition, interest group influence, and direct democracy: Three essays in positive political economy

This dissertation is a game theoretic analysis of legislative behavior. In three chapters it addresses aspects of strategic interaction among legislators and between interest groups and the legislators they seek to influence.; Chapter 1 explores how voter initiatives affect the ability of interest groups to influence policy outcomes. Voter initiatives, or ballot propositions, are commonly seen as a means for citizens to get a direct voice in the political process. Contrary to this view I posit that special interest groups use voter initiatives to support their efforts to influence legislative outcomes. The logic is the following: the threat to leave the bargaining table and to pursue their political goals outside the legislature via voter initiatives is an outside option that strengthens the interest groups' bargaining power vis-a-vis the legislature. In a legislative bargaining game I show how voter initiatives change the interaction between interest groups and legislators and derive equilibrium predictions about the policy outcomes and the size of campaign contributions. The predictions are tested using data of U.S. state legislative elections. The incumbency advantage is used as a proxy for campaign contributions paid to incumbents. The results support the model's predictions.; Chapter 2 analyzes the use of information and campaign contributions to influence political decisions. A model of information collection and transmission is developed. It identifies an indirect cost of searching for information in the form of an information externality that increases the cost of offering contributions. As a result, extreme interest groups find it beneficial to abandon information search altogether and to seek influence via contributions alone. The analysis lends support for a rather cynical view of interest group behavior in which lobby groups offer little or no information to the policy process.; Chapter 3 analyses how political candidates compete for election. It explores the consequences of candidate quality differences on the electoral strategies adopted in equilibrium. A model and computer simulations show that the policy locations chosen do not maximize the candidates' expected vote shares. In fact, candidates favor at the margin voters who are (probabilistically) most decisive for the election outcome.