Pandering and State-specific Costs of Mismatch in Political Agency

We study the implications of state-dependent costs of policy mismatch in political agency models where politicians have reputational concerns and "good" politicians share the same objectives as the voters. We find that state-dependent costs can increase the set of parameters where pandering is an equilibrium strategy. Indeed, in our model, pandering can arise even without office rents. Moreover, we show that voters do not necessarily prefer biased politicians to be in favour of the policy that produces the cheapest expected cost of mismatch. We discuss the implications of those results for populism, environmental policies and the equilibrium incentives to over- or under-provide lockdowns or other mitigation measures.