Inefficient equilibria in lobbying (original) (raw)

Political Biases in Lobbying under Asymmetric Information

Journal of the European Economic Association, 2007

This paper introduces asymmetric information in a pluralistic model of interest groups competition and analyzes its impact on policy biases. Lobbying groups are uninformed on a decision maker's preferences and use nonlinear contributions not only to compete for the agent's services but also to learn about his preferences in an otherwise standard common agency model of lobbying. Asymmetric information can be either on the decision maker's ideal point (horizontal differentiation) or on the strength of his own preferences for ideology (vertical differentiation). At equilibrium, asymmetric information redistributes bargaining powers between interest groups and the decision maker in non-trivial ways that may depend on the kind of informational asymmetry which is postulated. Asymmetric information tends to mitigate the influence of interest groups and contributions might be significantly reduced. Interest groups no longer contribute for a change in policy what it is worth to them as under complete information. Contributions incorporate a discount related to the group's ability to solve the asymmetric information problem. (JEL: D72, D82)

ISSN: 1955-611XHeterogeneous Lobbying Efficiency ∗

2008

Firms are actively involved in the formation of policies. So far, the literature has focused on the relationship between exposure to the competition and the level of protection. The ability of lobbies to achieve a more favorable policy is then directly related to the reaction of their welfare to the policy. This monotonic relationship contradicts the idea that all lobbies do not have the same efficiency. Indeed, this efficiency cannot be uniquely driven by the exposure to competition. This paper proposes an original approach of the lobbying activity taking into account that lobbies ’ efficiency is heterogeneous. Just as there are some skilled and unskilled cards players. This paper highlights two types of efficiency, the passive and the active. First, according to the sensitivity of the government to the policy, two lobbies equally affected by the policy may pay different contributions to obtain the same protection level. Second, if the active efficiency is introduced, then two lobb...

Heterogeneous Lobbying Eciency

Firms are actively involved in the formation of policies. So far, the literature has focused on the relationship between exposure to the competition and the level of protection. The ability of lobbies to achieve a more favorable policy is then directly related to the reaction of their welfare to the policy. This monotonic relationship contradicts the idea that all lobbies do not have the same efficiency. Indeed, this efficiency cannot be uniquely driven by the exposure to competition. This paper proposes an original approach of the lobbying activity taking into account that lobbies' efficiency is heterogeneous. Just as there are some skilled and unskilled cards players. This paper highlights two types of efficiency, the passive and the active. First, according to the sensitivity of the government to the policy, two lobbies equally affected by the policy may pay different contributions to obtain the same protection level. Second, if the active efficiency is introduced, then two lobbies exhibiting the same sensitivity to the policy may obtain two different equilibrium policies.

Endogenous Lobbying, Second Version

SSRN Electronic Journal, 2000

In this paper we present a citizen-candidate model of representative democracy with endogenous lobbying. We find that lobbying induces policy compromise and always affects equilibrium policy outcomes. In particular, even though the policy preferences of lobbies are relatively extreme, lobbying biases the outcome of the political process toward the centre of the policy space, and extreme policies cannot emerge in equilibrium. Moreover, in equilibrium, not all lobbies participate in the policy-making process.

Heterogeneous lobbying efficiency

2008

Firms are actively involved in the formation of policies. So far, the literature has focused on the relationship between exposure to the competition and the level of protection. The ability of lobbies to achieve a more favorable policy is then directly related to the reaction of their welfare to the policy. This monotonic relationship contradicts the idea that all lobbies do not have the same efficiency. Indeed, this efficiency cannot be uniquely driven by the exposure to competition. This paper proposes an original approach of the lobbying activity taking into account that lobbies' efficiency is heterogeneous. Just as there are some skilled and unskilled cards players. This paper highlights two types of efficiency, the passive and the active. First, according to the sensitivity of the government to the policy, two lobbies equally affected by the policy may pay different contributions to obtain the same protection level. Second, if the active efficiency is introduced, then two lobbies exhibiting the same sensitivity to the policy may obtain two different equilibrium policies.

Lobbying and compromise

Public Choice, 2006

The compromise enhancing effect of lobbying on public policy has been established in two typical settings. In the first, lobbies are assumed to act as 'principals' and the setters of the policy (the candidates in a Downsian electoral competition or the elected policy maker in a citizen-candidate model of electoral competition) are conceived as 'agents'. In the second setting, the proposed policies are solely determined by the lobbies who are assumed to take the dual role of 'principals' in one stage of the public-policy game and 'agents' in its second stage. The objective of this paper is to demonstrate that in the latter setting, the compromising effect of lobbying need not exist. Our reduced-form, two-stage public-policy contest, where two interest groups compete on the approval or rejection of the policy set by a politician, is sufficient to show that the proposed and possibly implemented policy can be more extreme and less efficient than the preferred policies of the interest groups. In such situations then more than the calf (interest groups) wish to suck the cow (politician) desires to suckle thereby threatening the public well being more than the lobbying interest groups. The main result specifies the conditions that give rise to such a situation under both the perfectly and imperfectly discriminating contests.

Lottery Versus All-Pay Auction Models of Lobbying

2002

I first provide a complete characterization of the unique equilibrium of the lottery game by n lobbyists with asymmetric valuations, and then compare the lottery and the all-pay auction models of lobbying. I show that the exclusion principle discovered by Baye, Kovenock and de Vries (1993) for all-pay auction does not apply to lottery. I also show that the perverse effect that an exogenous cap may increase the total lobbying expenditure in a two-bidder all-pay auction discovered by Che and Gale (1998) does not apply to lottery. * I am grateful to an anonymous referee, Steven Matthews, Stephen Morris and Andrew Postlewaite forvaluable comments and suggestions. All errors are mine.

Lobbying and asymmetric information

Public Choice, 1992

Informational lobbying-the use by interest groups of their (alleged) expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies-is often regarded as an important means of influence. This paper analyzes this phenomenon in a game setting. On the one hand, the interest group is assumed to have private information which is relevant to the policymaker, whilst, on the other hand, the policymaker is assumed to be fully aware of the strategic incentives of the interest group to (mis)report or conceal its private information. It is shown that in a setting of partially conflicting interests a rationale for informational lobbying can only exist if messages bear a cost to the interest group and if the group's preferences carry information in the 'right direction'. Furthermore, it is shown that it is not the content of the message as such, but rather the characteristics of the interest group that induces potential changes in the policymaker's behavior. In addition, the model reveals some interesting results on the relation between, on the one hand, the occurrence and impact of lobbying and, on the other hand, the cost of lobbying, the stake which an interest group has in persuading the policymaker, the similarity between the policymaker's and the group's preferences, and the initial beliefs of the policymaker. Moreover, we relate the results to some empirical findings on lobbying. Much o f the pressure placed upon government and its agencies takes the form o f freely provided "'objective" studies showing the important outcomes to be expected from the enactment of particular policies (Bartlett, 1973: 133, his quotation marks).

Ideological uncertainty and lobbying competition

Polarized interest groups compete to influence a decision-maker through monetary contributions. The decision-maker chooses a one-dimensional policy and has private information about his ideal point. Competition between interest groups under asymmetric information yields a rich pattern of equilibrium strategies and payoffs. Policies are systematically biased towards the decisionmaker's ideal point and it may sometimes lead to a “laissez-faire” equilibrium where the decision-maker is freed from any influence. Either the most extreme decision-makers or the most moderate ones may get information rent depending on their ideological bias. The market for influence may exhibit segmentation with interest groups keeping an unchallenged influence on ideologically close-by decision-makers. Interest groups refrain from contributing when there is too much uncertainty on the decision-maker's ideology and when the latter is ideologically too far away.