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

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  • 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.

Suggested Citation

  • Frisell, Lars, 2000. "Taking Advice from Imperfectly Informed Lobbyists: When to Match Hawks with Hawks," SSE/EFI Working Paper Series in Economics and Finance 355, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0355
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    References listed on IDEAS

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    More about this item

    Keywords

    Heterogeneous vs. homogeneous panels; informational efficiency; reputation; external forces;
    All these keywords.

    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

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