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Centralized Decision Making and Informed Lobbying

Author

Listed:
  • Rafael Costa Lima
  • Humberto Moreira
  • Thierry Verdier

Abstract

We address the trade-off between centralized and decentralized decision making subject to influence from privately informed lobbies. We focus on informative equilibria with separating differentiable contribution schedules and identify an information transmission effect under centralized structures. Such effect decreases capture and increases welfare when lobbies have "aligned preferences." The opposite effect holds for "polarized preferences." We present two examples of this framework: local public goods and customs union agreements. Finally, we compare the policy outcomes from this political economy perspective to those under a normative mechanism design approach, and extend our analysis to the discussion of pooling equilibria.

Suggested Citation

  • Rafael Costa Lima & Humberto Moreira & Thierry Verdier, 2017. "Centralized Decision Making and Informed Lobbying," American Economic Journal: Microeconomics, American Economic Association, vol. 9(4), pages 324-355, November.
    • Handle: RePEc:aea:aejmic:v:9:y:2017:i:4:p:324-55
    Note: DOI: 10.1257/mic.20150253
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    Cited by:

    1. Cheng Li, 2020. "Centralized policymaking and informational lobbying," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 54(4), pages 527-557, April.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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