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The Effectiveness of Caps on Political Lobbying

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  • Matejka, M.
  • Onderstal, A.M.
  • De Waegenaere, A.M.B.

    (Tilburg University, Center for Economic Research)

Abstract

In this paper, we analyze a lobby game, modelled as an all-pay auction in which interest groups submit bids in order to obtain a political prize.The bids are restricted to be below a cap imposed by the government.For both an incomplete and a complete information setting we show the following results. While ex post a lower cap may lead to higher lobbying expenditures, ex ante a lower cap always implies lower expected total lobbying expenditures.The incompletely informed government maximizes social welfare by implementing a cap equal to zero.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2002-44.

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Date of creation: 2002
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Handle: RePEc:dgr:kubcen:200244

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Web page: http://center.uvt.nl

Related research

Keywords: lobbying; auctions; game theory;

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References

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  1. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer, vol. 8(2), pages 291-305.
  2. Onderstal, A.M., 2002. "Socially Optimal Mechanisms," Discussion Paper 2002-34, Tilburg University, Center for Economic Research.
  3. Potters, J.J.M. & Winden, F. van, 1992. "Lobbying and asymmetric information," Open Access publications from Tilburg University urn:nbn:nl:ui:12-223989, Tilburg University.
  4. Laffont, Jean-Jacques & Robert, Jacques, 1996. "Optimal auction with financially constrained buyers," Economics Letters, Elsevier, vol. 52(2), pages 181-186, August.
  5. Vijay Krishna & John Morgan, 1994. "An Analysis of the War of Attrition and the All-Pay Auction," Game Theory and Information 9409002, EconWPA.
  6. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-94, March.
  7. Amann, Erwin & Leininger, Wolfgang, 1996. "Asymmetric All-Pay Auctions with Incomplete Information: The Two-Player Case," Games and Economic Behavior, Elsevier, vol. 14(1), pages 1-18, May.
  8. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Cramton, Peter, 1998. "The Efficiency of the FCC Spectrum Auctions," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 727-36, October.
  10. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
  11. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June.
  12. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-99, June.
    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. Erwin Amann & Wolfgang Leininger, 1995. "Expected revenue of all-pay and first-price sealed-bid auctions with affiliated signals," Journal of Economics, Springer, vol. 61(3), pages 273-279, October.
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Cited by:
  1. Matthias Dahm & Nicolas Porteiro, 2005. "Informational Lobbying under the Shadow of Political Pressure," Discussion Papers 1409, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Onderstal, A.M., 2002. "Socially Optimal Mechanisms," Discussion Paper 2002-34, Tilburg University, Center for Economic Research.
  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.

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