Structural Equilibrium Analysis of Political Advertising

We present a structural model of political advertising in equilibrium. Candidates choose advertising across media markets in order to maximize the probability of winning the national election. The voter model takes the form of an aggregate random coefficients discrete choice model in which advertising affects a voter’s incentive to vote for either candidate or not to vote at all. We estimate the model using detailed advertising and voting data from the 2000 and 2004 Presidential elections. We use the model to conduct a counterfactual in which we eliminate the Electoral College, and consider a direct national vote. Changing the structure of the electoral process alters candidates’ marginal incentives to advertise in a given market. This leads to a new equilibrium allocation of advertising and potentially a new voting outcome. Furthermore, our model could be used for other counterfactuals, such as considering the effects of 3rd-party candidates or certain campaign finance reforms, and could be applied or extended to races for other offices (e.g. house, senate or gubernatorial) or the primaries. Please note our counterfactual results are in progress and are not yet in the paper.