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Taking Advice from Imperfectly Informed Lobbyists: When to Match Hawks with Hawks

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Author Info
Frisell, Lars (Dept. of Economics, Stockholm School of Economics)
Abstract

In 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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Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 355.

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Length: 22 pages
Date of creation: 03 Feb 2000
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Handle: RePEc:hhs:hastef:0355

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Related research
Keywords: Heterogeneous vs. homogeneous panels; informational efficiency; reputation; external forces;

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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

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References listed on IDEAS
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.:
  1. Shin Hyun Song, 1994. "The Burden of Proof in a Game of Persuasion," Journal of Economic Theory, Elsevier, vol. 64(1), pages 253-264, October. [Downloadable!] (restricted)
  2. Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
    Other versions:
  3. Andreoni, James A & Miller, John H, 1993. "Rational Cooperation in the Finitely Repeated Prisoner's Dilemma: Experimental Evidence," Economic Journal, Royal Economic Society, vol. 103(418), pages 570-85, May. [Downloadable!] (restricted)
  4. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring. [Downloadable!] (restricted)
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  5. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
  6. Austen-Smith David, 1993. "Interested Experts and Policy Advice: Multiple Referrals under Open Rule," Games and Economic Behavior, Elsevier, vol. 5(1), pages 3-43, January. [Downloadable!] (restricted)
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