Politicians' decision making with re-election concerns

We study the impact of elected officials' re-election concerns on their decisions on whether to undertake new projects. The value of a project to a jurisdiction depends in part on its elected official's uncertain ability at providing some public goods. Our main result is that the elected official's willingness to pay for the project differs from voters' willingness to pay. If the incumbent official expects to lose (win) the election, then she is willing to pay more (less) than the project's total value to voters. We show how our analysis can be applied to bidding wars among jurisdictions for firms. (C) 1997 Elsevier Science S.A.