Efficient political contributions with conditional Coasian contracts

Bryan Engelhardt and Justin Svec

Journal of Economic Policy Reform, 2016, vol. 19, issue 1, 65-76

Abstract: The externalities associated with political contributions imply agents choose a socially inefficient level. A typical market solution to these externalities would involve Coase bargaining where agents form contracts with payments conditional on the actions of others. These contracts, however, are hard to enforce because political contributions can be unobservable or unmeasurable. In this study, we modify these Coasian contracts, making the payments conditional on the outcome of the political election. We show the agents that form these contracts contribute the socially efficient amount.

Date: 2016
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DOI: 10.1080/17487870.2015.1034601

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