Effect of Campaign Advertising Expenditure on Candidate Quality Signaling in an Election

Abstract

In an electoral market, if voters cannot distinguish between good-quality and bad-quality candidates before voting, bad-quality candidates may drive good-quality ones out of the election market: this is known as electoral lemon problem. That is, good-quality candidates may not win the election against bad-quality populist ones. This electoral lemon problem due to adverse selection can be eliminated or reduced by the screening by voters or by the signaling by high-quality candidates. Voters can screen candidate quality or candidates may send signal to voters. We attempt to examine the signaling model by candidates to inform voters that they are of high quality through campaign advertising and its expenditures. We examine a signaling model to explain the empirical results in which incumbent candidates have substantial positive effect on votes and also inefficient outcome from higher spending. Campaign expenditures can increase vote productivity. The campaign advertising of candidates serves to identify the candidates who possess high-quality characteristics. In reality, campaign expenditures can be spent by candidates for the purpose of sending a signal for candidate's personal quality. But quality signaling is often unproductive and thus results in the inefficient outcome.