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Using a multistage model of collective decision making, we study how partisan polarization in legislatures affects the initial choice and future revision of procedural rules. We analyze how a legis...

We propose a model of impressionable voters. Impressionable voters vote based on impressions rather than maximizing expected utility. We apply our model to elections with multiple candidates and solve for the stationary distributions of the implied stochastic process. In elections with two candidates, we find that impressionable voters select the candidate that maximizes utilitarian welfare. In multi-candidate elections, Condorcet winners are elected provided that a majority of voters is able to sufficiently distinguish competing candidates. In such cases, models with impressionable voters may have better normative properties than models with rational voters. (JEL D71, D72, D91)

We examine the interaction between partisan affect and elite polarization in a behavioral voting model. Voting is determined by affect rather than rational choice. Parties are office-motivated; they choose policies to win elections. We show that parties bias their policies toward their partisans if voters exhibit ingroup responsiveness, i.e., they respond more strongly to their own party’s policy deviations than to policy deviations by the other party. Our results suggest that affective polarization is a driver of the growing elite polarization in American politics. Importantly, this observation does not assume any shifts in the voters’ bliss points and is therefore orthogonal to the controversy over whether the American electorate has become more polarized in ideology.

We consider a behavioral model of voting in multi-candidate elections under plurality rule. In the case of a positive impression of the campaign leader, voters increase their propensity to vote for that candidate, while in the case of a negative impression voters decrease their propensity. The formation of positive or negative impressions depends on an endogenous aspiration level. We show that in multi-candidate elections, in any stationary distribution, the winner receives a share of 50% of votes. Our results suggest that achieving coordination is ‘path-dependent’: whether voters manage to coordinate on the majority-preferred candidate critically depends on the initial state. We then identify conditions that make the election of the majority-preferred candidate more likely. However, even if the majority candidate is elected for sure, voting behavior is only partially coordinated.

This chapter introduces a finite-horizon (three-period) model of corporate campaigns in which an activist targets a single firm. The activist cares solely about the social benefits generated by the private regulation the firm is capable of undertaking. A firm can undertake costly effort in each period to improve its reputation in the subsequent period. The activist could undertake costly effort to impair the firm's reputation. As compared to a setting in which the firm faced no activist, the firm chooses a higher level of private regulation in the first period and, in expectation, a higher level of private regulation in the second period as well. The authors interpret this increase as self-insurance against reputational harm. The activist has a strategic effect on the firm in the second period: if the campaign impairs the firm's reputation, the firm will undertake more private regulation than it would have had its reputation remained the same or even improved.

This chapter models the interaction between a firm and activist using an infinite-horizon dynamic stochastic game. The firm enhances its reputation through private regulation, but the firm has an incentive to coast on its reputation by private regulation as its reputation grows. The activist can harm the firm’s reputation through criticism, which impairs the firm’s reputation on the margin, and confrontation, which can trigger a crisis that can severely damage the firm’s reputation. Criticism and confrontational activity are shown to be imperfect substitutes. The more patient the activist, or the more passionate about externality reduction, the more likely the activist is to rely on confrontation. The more patient the firm, the more likely that it will be targeted by an activist that relies on confrontation. The chapter also explores whether the activist might reward the firm with praise.

In recent years, many activists have concluded that public processes, such as new legislation, regulatory enforcement, or lawsuits, respond too slowly and can be blocked too easily by special interests. In response they have turned to private politics instead. Private politics refers to actions by private interests, such as activists and nongovernmental organizations (NGOs), that target private agents, typically firms. This chapter describes two key elements of private politics: corporate campaigns and private regulation. It discusses the logic of corporate campaigns, how firms endeavor to respond to them, and empirical evidence on the consequences of campaigns. It then turns to private regulation, and its close counterpart, corporate social responsibility. The chapter raises a puzzle about corporate social responsibility that the models in later chapters will help resolve. The chapter concludes by providing an overview of the remainder of the book.

This chapter summarizes each preceding chapter and then offers lessons for scholars and practitioners. Scholars should note the value of dynamic modeling in understanding interactions between activists and firms in the realm of private politics. Activists and firms can use the insights of the model to approach corporate campaigns more strategically. For example, for activists, the framework suggests that efforts aimed at hurting the reputations of firms can do more than serve an ideological aim at making companies look bad, or as a device to threaten harm. Activists can play the role of private regulators when effective public regulation is missing. For leaders of firms, the analysis highlights that corporate social responsibility and other initiatives can serve to enhance a firm’s reputation, but they can also be viewed as a form of risk management in the face of activist pressures that can potentially harm reputation.

This chapter extends the model to include two potential targets for campaigns. Activists targeting firms in different industries are shown to be likely to focus on the firm with the weaker reputation or greater sensitivity to reputation. The latter finding rationalizes the practice of secondary targeting in which an activist targets a consumer-facing company that cares a lot about its reputation rather than the companies in its supply chain creating the harm. In the case of two potential targes in the same industry, the competitive interdependence between the two firms affects the targeting decision. When it is weak—e.g., when firms sell differentiated products—the activist tends to target the firm whose characteristics predispose it to engage in more private regulation than its rival (e.g., the more patient firm, the market leader). When competitive interdependence is strong—as in commodities industries—the activist targets the firm predisposed toward less private regulation.

This book presents a theory of corporate campaigns in which activists use campaigns as a means of harming a firm’s reputation in hope of motivating it to increase its private regulation—corporate social responsibility (CSR) activities aimed at reducing negative externalities or other forms of social harm caused by the firm. The analysis is dynamic in nature because interactions between activists and firms unfold over time. This captures the idea that a firm’s reputation is an asset that can be built or harmed over time. As a firm’s reputation grows, the firm tends to coast on its reputation by reducing its private regulation. This explains why a pragmatic activist—one who cares about the outcome of private regulation and not about the firm’s reputation per se—would find it worthwhile to harm the firm’s reputation. Chapter 2 lays out a three-period model of corporate campaigns to build intuition about the interaction of the activist and the firm. Chapter 3 extends the model to an infinite horizon and allows the activist to use various tactics: criticism, which has a potentially mild impact on the firm’s reputation; confrontation, which can cause a reputational crisis in which the firm’s reputation can be dramatically impaired; and rewards, which increase a firm’s reputation. Chapter 4 analyzes whether the presence of the activist increases or diminishes social welfare. Chapter 5 explores how the activist would choose among potential target firms in the context of different forms of competition between firms. Chapter 6 summarizes and offers lessons for scholars and practitioners.