We present a model of elections in which interest group donations allow candidates to shift policy positions. We show that if donations were prohibited, then a unique equilibrium regarding the platform choices of candidates would exist. Our game with financing of political campaigns exhibits two...

When politicians are provided with insufficient incentives by the democratic election mechanism, we show that social welfare can be improved by threshold contracts. A threshold incentive contract stipulates a performance level which a politican must reach in order to have the right to stand for...

When politicians have lower discount factors than voters, democratic elections cannot sufficiently motivate politicians to undertake long-term socially beneficial projects. When politicians can offer incentive contracts which become effective upon reelection, the hierarchy of contracts and...