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Informational lobbying under the shadow of political pressure

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  • Matthias Dahm

    ()

  • Nicolás Porteiro

    ()

Abstract

We examine the incentives of an interest group to provide verifiable policy-relevant information to a political decision-maker and to exert political pressure on her. We show that both lobbying instruments are interdependent. In our view information provision is a risky attempt to affect the politician’s beliefs about the desirability of the lobby’s objective. The constraints governing informational lobbying determine a specific lottery available. The circumstances under which political pressure can be applied specify the lobby’s valuation of different beliefs of the politician and, thus, her attitude toward risk. The combination of lotteries available and the “shadow of political pressure” (or induced risk preference) determines the optimal lobbying behavior. We identify several factors that induce risk proclivity (and thus information provision), which allows to explain the stylized fact that lobbies engage both in information provision and political pressure. Moreover, our approach gives a novel explanation for the fact that interest groups often try to provide information credibly. We finally study the extent to which this preference for credibility is robust and identify some instances in which lobbies may prefer to strategically withhold information.

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Bibliographic Info

Article provided by Springer in its journal Social Choice and Welfare.

Volume (Year): 30 (2008)
Issue (Month): 4 (May)
Pages: 531-559

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Handle: RePEc:spr:sochwe:v:30:y:2008:i:4:p:531-559

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References

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  1. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "Rigging The Lobbying Process: An Application Of The All- Pay Auction," Purdue University Economics Working Papers 1002, Purdue University, Department of Economics.
  2. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  3. Matthias Dahm & Nicolas Porteiro, 2005. "Side Effects of Campaign Finance Reform," Discussion Papers 1408, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Hyun Song Shin, 2003. "Disclosures and Asset Returns," Econometrica, Econometric Society, vol. 71(1), pages 105-133, January.
  5. Bennedsen, Morten & Feldmann, Sven E., 2000. "Informational Lobbying And Political Contributions," Working Papers 08-2000, Copenhagen Business School, Department of Economics.
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  7. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Nicolas Porteiro & Matthias Dahm, 2004. "The Political Economy of Interest Groups: Pressure and Information," Econometric Society 2004 North American Summer Meetings 352, Econometric Society.
  9. Lohmann, Susanne, 1995. " Information, Access, and Contributions: A Signaling Model of Lobbying," Public Choice, Springer, vol. 85(3-4), pages 267-84, December.
  10. Baker, Scott & Mezzetti, Claudio, 2005. "Disclosure as a Strategy in the Patent Race," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 173-94, April.
  11. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
  12. Susanne Lohmann, 1995. "A Signaling Model Of Competitive Political Pressures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 181-206, November.
  13. Laffont, J.-J., 1999. "Political Economy, Information and Incentives," Papers 99.516, Toulouse - GREMAQ.
  14. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  15. Laffont, Jean-Jacques, 1999. "Political economy, information and incentives1," European Economic Review, Elsevier, vol. 43(4-6), pages 649-669, April.
  16. Matejka, M. & Onderstal, A.M. & De Waegenaere, A.M.B., 2002. "The Effectiveness of Caps on Political Lobbying," Discussion Paper 2002-44, Tilburg University, Center for Economic Research.
  17. Sloof, Randolph & van Winden, Frans, 2000. " Show Them Your Teeth First! A Game-Theoretic Analysis of Lobbying and Pressure," Public Choice, Springer, vol. 104(1-2), pages 81-120, July.
  18. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  19. James M. Snyder, 1991. "On Buying Legislatures," Economics and Politics, Wiley Blackwell, vol. 3(2), pages 93-109, 07.
  20. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June.
  21. Austen-Smith, David, 1998. "Allocating Access for Information and Contributions," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(2), pages 277-303, October.
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Citations

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Cited by:
  1. Santiago Urbiztondo & Jean‐Philippe Bonardi & Bertrand V. Quélin, 2013. "International Expansion, Diversification and Regulated Firm Nonmarket Strategy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 34(6), pages 379-396, 09.
  2. Dahm, Matthias & González, Paula & Porteiro Fresco, Nicolás, 2008. "Trials, tricks and transparency: how disclosure rules affect clinical knowledge," Working Papers 2072/5360, Universitat Rovira i Virgili, Department of Economics.
  3. Matthias Dahm & Robert Dur & Amihai Glazer, 2009. "Lobbying of Firms by Voters," Tinbergen Institute Discussion Papers 09-068/1, Tinbergen Institute.
  4. Matthias Dahm & Nicolás Porteiro, 2008. "Side Effects of Campaign Finance Reform," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1057-1077, 09.
  5. Daniel Stone, 2011. "A signal-jamming model of persuasion: interest group funded policy research," Social Choice and Welfare, Springer, vol. 37(3), pages 397-424, September.
  6. Christopher Cotton & Arnaud Dellis, 2012. "Informational Lobbying and Agenda Distortion," Working Papers 2013-03, University of Miami, Department of Economics.
  7. Matthias Dahm & Nicolás Porteiro, 2006. "Biased Contests," Working Papers 06.21, Universidad Pablo de Olavide, Department of Economics.
  8. Christopher Cotton, 2008. "Should We Tax or Cap Political Contributions? A Lobbying Model with Policy Favors and Access," Working Papers 0901, University of Miami, Department of Economics.
  9. Matthias Dahm & Robert Dur & Amihai Glazer, 2012. "How a Firm Can Induce Legislators to Adopt a Bad Policy," CESifo Working Paper Series 3788, CESifo Group Munich.
  10. Javier A. Prado Domínguez & Antonio García Lorenzo, 2010. "Competencia e incentivos a la cooperación en la interacción de grupos de interés que pretenden aumentar su influencia política directa: ¿cuál es la importancia de la presión política?," Hacienda Pública Española, IEF, vol. 192(1), pages 105-125, March.
  11. Christopher Cotton, 2009. "Competition for Access and Full Revelation of Evidence," Working Papers 2010-12, University of Miami, Department of Economics.
  12. Thomas Groll & Christopher J. Ellis, 2013. "Dynamic Commercial Lobbying," CESifo Working Paper Series 4114, CESifo Group Munich.
  13. Christopher Cotton, 2010. "Evidence Revelation in Competitions for Access," Working Papers 2010-21, University of Miami, Department of Economics.
  14. Martin Gregor, 2011. "Corporate lobbying: A review of the recent literature," Working Papers IES 2011/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Nov 2011.
  15. Cotton, Christopher, 2007. "Informational Lobbying and Competition for Access," MPRA Paper 1842, University Library of Munich, Germany.

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