Agency Problems in Political Campaigns

Agency Problems in Political Campaigns: Media Buying and Consulting

by Gregory J. MartinEmory University and Zachary PeskowitzEmory University

Political consultants play a major role in U.S. elections. Consultants make important choices on how to allocate candidates’ campaign funds across activities like direct mail, get-out-the vote operations, and television advertisements. These choices also have implications for the revenues that consultants earn. We use a new dataset of consulting firms’ revenues and costs to study the markups that firms charge political candidates. We find that markups are higher for inexperienced candidates relative to experienced candidates, and PACs relative to candidates. We also find significant differences across the major parties: firms working for Republicans charge higher prices, exert less effort, and induce less responsiveness in their clients’ advertising expenditures to electoral circumstances than do their Democratic counterparts. We connect this observation to the distribution of ideology among individual consulting firm employees, arguing that these higher rents incentivize consultants to work against their intrinsic ideological motivations. The internal organization of firms reflects an attempt to mitigate this conflict of interest; firms are composed of ideologically homogeneous employees, and are more likely to work for ideologically proximate clients.

Read the full article.

American Political Science ReviewVolume 112Issue 2, May 2018