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Favors for Sale: Strategic Analysis of a Simple Menu Auction with Adverse Selection

  • Laussel, Didier
  • Le Breton, Michel

We study the distribution of a fixed amount of "favors" by an incumbent politician between two pressure groups, each of them offering to the agent a campaign contribution contingent on the quantity of "favors" received. Assuming that the total amount supplied is a private information of the politician the equilibrium contribution schedules are fully characterized. It is shown that the principals net equilibrium payoffs are larger the more quickly their marginal valuations of the favors decrease with the amount received. The equilibrium allocation of the stock of "favors" is efficient if the interest group utility functions are identical.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 361.

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Date of creation: 2005
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Handle: RePEc:ide:wpaper:1309
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  1. Richard Boylan, 1998. "Private bills: a theoretical and empirical study of lobbying," Public Economics 9801002, EconWPA.
  2. Baye, M.R. & Kovenock, D. & De Varies, C.G., 1990. "The All-Pay Auction With Complete Information," Papers 9051, Tilburg - Center for Economic Research.
  3. Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
  4. Gene M. Grossman & Elhanan Helpman, 1993. "Trade Wars and Trade Talks," NBER Working Papers 4280, National Bureau of Economic Research, Inc.
  5. Steven D. Levitt, 1995. "Policy Watch: Congressional Campaign Finance Reform," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 183-193, Winter.
  6. Martimort, D., 1992. "Exclusive Dealing, Common Agency and Multiprincipals Incentive Thoery," Papers 92.278, Toulouse - GREMAQ.
  7. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
  8. Snyder, James M, Jr, 1990. "Campaign Contributions as Investments: The U.S. House of Representatives, 1980-1986," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1195-1227, December.
  9. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  10. Laussel, Didier & Le Breton, Michel, 2001. "Conflict and Cooperation: The Structure of Equilibrium Payoffs in Common Agency," Journal of Economic Theory, Elsevier, vol. 100(1), pages 93-128, September.
  11. James M. Snyder, 1991. "On Buying Legislatures," Economics and Politics, Wiley Blackwell, vol. 3(2), pages 93-109, 07.
  12. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  13. 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.
  14. Amann, Erwin & Leininger, Wolfgang, 1996. "Asymmetric All-Pay Auctions with Incomplete Information: The Two-Player Case," Games and Economic Behavior, Elsevier, vol. 14(1), pages 1-18, May.
  15. Lohmann, Susanne, 1995. " Information, Access, and Contributions: A Signaling Model of Lobbying," Public Choice, Springer, vol. 85(3-4), pages 267-84, December.
  16. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
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