Taking Advice from Imperfectly Informed Lobbyists: When to Match Hawks with Hawks
AbstractIn this paper we study a sender-receiver game between an uninformed government and two informed lobbyists. There is a conflict of interest between government and lobbyists in the sense that the government's payoff is state-dependent while lobbyists prefer a certain policy irrespective of the contingency. Hence, lobbyists' recommendations cannot be trusted a priori and a single lobbyist will convey no information in equilibrium. When two or more lobbyists interact non-cooperatively, matters improve. Our main result is that, contrasting previous results, homogeneous panels may be preferred to a heterogeneous one. If lobbyists are perfectly informed the first-best equilibrium exists even when the game has cheap talk. Moreover, if inaccurate messages impose a cost on the sender, i.e., if lobbyists care about their prestige, the assumption of perfectly informed advisors is not necessary to sustain truthtelling. In other words, reputational concerns work as a substitute for informational precision.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 355.
Length: 22 pages
Date of creation: 03 Feb 2000
Date of revision:
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Heterogeneous vs. homogeneous panels; informational efficiency; reputation; external forces;
Find related papers by JEL classification:
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-07 (All new papers)
- NEP-CDM-2000-02-07 (Collective Decision-Making)
- NEP-IND-2000-02-07 (Industrial Organization)
- NEP-MIC-2000-02-07 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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