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 induced risk preference determines the optimal lobbying behavior. Our approach gives a novel explanation for the fact that interest groups often try to provide information credibly. We identify several factors that induce risk proclivity (and thus information provision). We also show that the availability of political pressure might have a deterrence effect on information provision. This ‘shadow of political pressure’ might impede information provision at all or induce a complementary relationship between both lobbying instruments.
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
1409.
Length: Date of creation: Jul 2005 Date of revision: Handle: RePEc:nwu:cmsems:1409
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
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Matthias Dahm & Nicolás Porteiro, 2006.
"Biased Contests,"
Working Papers
06.21, Universidad Pablo de Olavide, Department of Economics.
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