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Agency Problems in Political Campaigns: Media Buying and Consulting

  • GREGORY J. MARTIN (a1) and ZACHARY PESKOWITZ (a1)
Abstract

Advertising expenditures in congressional campaigns are made not directly by campaigns themselves but indirectly though intermediary firms. Using a new dataset of revenues and costs of these firms, we study the markups that these firms charge 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.

Copyright
Corresponding author
Gregory J. Martin is an Assistant Professor, Emory University, 1555 Dickey Drive, Atlanta, GA 30322 (gregory.martin@emory.edu).
Zachary Peskowitz is an Assistant Professor, Emory University, 1555 Dickey Drive, Atlanta, GA 30322 (zachary.f.peskowitz@emory.edu).
Footnotes
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We received valuable comments from seminar audiences at Caltech, Stanford GSB, Emory, the University of Houston Political Economy Conference, and MPSA. We thank Tom Clark for his advice and guidance on this project and Sean Cain and Brian Richter for helpful discussant comments.

Footnotes
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American Political Science Review
  • ISSN: 0003-0554
  • EISSN: 1537-5943
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