Persuasion Through the Purse: How Political Contributions Crowd Out Information
Interest groups can influence political decisions in two distinct ways: by offering contributions to political actors and by providing them with relevant information that is advantageous for the group. We analyze the conditions under which interest groups are more inclined to use one or the other channel of influence. First, we identify an indirect cost of searching for information in the form of an information externality that increases the cost of offering contributions. We then show that an extreme interest group might find it beneficial to abandon information search altogether and instead seeks influence solely via contributions. Thus, our analysis lends support to a rather cynical view of lobbying wherein groups provide little or no useful information.
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