Asymmetric policy effects, campaign contributions, and the spatial theory of elections

A spatial model of elections with campaign contributions is constructed in which contributors give money to help the candidates they like get elected. It is shown how candidate-specific policy effects on firms cause candidates to adopt different policy positions. It is also shown how the additional presence of firm-specific policy effects may cause polarization of candidate policy positions. A comparative statics analysis establishes relationship among several key parameters of the model. Even though contributors take candidate positions as given, anticipatory position-taking by the candidates causes contributors to exert a powerful influence over candidate behavior.