The Impact of Competition on Advertising: The Case of Political Campaign Expenditures

This paper uses constituency-level political campaign expenditures to analyze the impact of competition on advertising. A theoretical model, based on expected utility maximization, predicts an uncertain impact of increased competition on campaign spending. The direction of this impact is tested using data from the 1979 and 1980 Canadian federal elections. Competition is found to have a positive effect on spending, and several other plausible hypotheses of expenditure determination are rejected. These include constant spending per voter or per constituency, the random allocation of funds, and spending based on incumbency, ministerial status, or the spending of other political parties.