Campaign contributions and policy divergence

Standard spatial models of political competition predict that competing candidates would converge to the same policy position. In this paper, we present a novel mechanism of policy divergence in a model of campaign finance, where campaign contributions from ideologically extreme donors can be used to boost the turnout of impressionable voters. In our model, the exact location of the median voter is unknown to the candidates. Together with donors' contributions, this generates policy divergence even when the candidates are ex-ante identical and purely office-motivated. We characterize the unique equilibrium of the model in mixed strategies and provide closed form expression for the expected level of policy polarization. We further show that polarization is higher when only the incumbent can benefit from campaign contributions.