Pricing Political Rallies

Originally published in Economic Affairs

Why are political rallies free to attend? Fundraising is a central campaign activity and a perennial correlate of political victory. We argue that politicians set a zero price for rallies in order to reap a non-pecuniary benefit: political support. An ‘allocation by waiting’ scheme selects those attendees with a lower opportunity cost of time relative to a standard ‘allocation by price’ scheme. Transactions costs mitigate Coasean bargaining by removing the secondary market, thereby altering the composition of the average rally crowd. This mechanism allows politicians to facilitate exchange with ‘general interests’: citizens who do not engage in rent seeking due to collective action costs but still stand to gain from redistributive policies. 

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