The Same Side of Two Coins: The Peculiar Phenomenon of Bet-Hedging in Campaign Finance

This paper addresses the propensity of large donors to make financial contributions to competing candidates or party organizations during the same election cycle--for example, giving money to both Bush and Kerry during the 2004 presidential race. This practice, here termed "'bet-hedging," is analyzed in strategic and game-theoretic terms. The paper explores the prevalence of bet-hedging, the possible motivations behind the practice, and the informational concerns surrounding it. Bet-hedging, above all other donation practices, carries a unique implication of ex post favor-seeking.

A donor who prefers one side over the other at least partially cancels out its own contribution by hedging its bets. The generosity of a donor who has no preference can only be motivated by a desire for increased influence over the winning party or, at a minimum, the hope of escaping retaliation for failing to support the eventual victor. The paper thus contends that bet-hedging can (constitutionally) and, though it is a tougher question, should (normatively) be regulated under the Buckley v. Valeo and McConnell v. FECframeworks.