To act or not to Act? Political competition under different types of backward-looking voters

We present a model of political competition in which an incumbent politician may implement a costly policy to prevent a possible bad outcome. A competent politician is privately informed about the posterior probability of that outcome and an incompetent one only knows the prior probability. After the policy is implemented, it may be unknown whether or not it was required. We demonstrate that, under these conditions, a competent politician leverages her private information only when voters base their decisions solely on the policy's outcome rather than on what it may indicate about the incumbent's future performance.