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Informational Lobbying under the Shadow of Political Pressure

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  • Matthias Dahm

    ()
    (Universidad Carlos III de Madrid)

  • Nicolás Porteiro

    ()
    (Department of Economics, Universidad Pablo de Olavide)

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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File URL: http://www.upo.es/serv/bib/wps/econ0614.pdf
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Bibliographic Info

Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 06.14.

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Length: 33 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:pab:wpaper:06.14

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Keywords: Experts; Influence; Credibility; Political contributions; Issue ads.;

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References

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  1. Morten Bennedsen & Sven E. Feldmann, 2000. "Informational Lobbying and Political Contributions," CIE Discussion Papers 2000-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  2. Hyun Song Shin, 2001. "Disclosures and asset returns," LSE Research Online Documents on Economics 25044, London School of Economics and Political Science, LSE Library.
  3. Lohmann, Susanne, 1995. " Information, Access, and Contributions: A Signaling Model of Lobbying," Public Choice, Springer, vol. 85(3-4), pages 267-84, December.
  4. Matthias Dahm & Nicolás Porteiro, 2006. "Side Effects of Campaign Finance Reform," Working Papers 06.15, Universidad Pablo de Olavide, Department of Economics.
  5. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  6. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  7. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
  8. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
  9. 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.
  10. Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
  11. James M. Snyder, 1991. "On Buying Legislatures," Economics and Politics, Wiley Blackwell, vol. 3(2), pages 93-109, 07.
  12. 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.
  13. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
  14. 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.
  15. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  16. Nicolas Porteiro & Matthias Dahm, 2004. "The Political Economy of Interest Groups: Pressure and Information," Econometric Society 2004 North American Summer Meetings 352, Econometric Society.
  17. Laffont, J.-J., 1999. "Political Economy, Information and Incentives," Papers 99.516, Toulouse - GREMAQ.
  18. Laffont, Jean-Jacques, 1999. "Political economy, information and incentives1," European Economic Review, Elsevier, vol. 43(4-6), pages 649-669, April.
  19. Susanne Lohmann, 1995. "A Signaling Model Of Competitive Political Pressures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 181-206, November.
  20. 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.
  21. 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.
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