Election Contests with Endogenous Spending Constraints

We consider an election contest in which two candidates first raise funds and then compete for votes among a continuum of voters by engaging in persuasive efforts. To cover campaign spending, candidates must raise funds by bearing costs beforehand and they compete by allocating persuasive efforts among voters. Each voter is persuaded by campaign effort and votes for the candidate who expends more persuasive effort than the other. We character-ize equilibrium strategies—both fund-raising and allocation of persuasive effort strategies. A candidate with a higher value for the vote raises more funds than the other, but the latter competes in the election stage by giving zero persuasive effort with a positive probability to each voter and using the saved money for expending a high level of persuasive effort with the remaining probability. The role of fund-raising costs is also discussed.