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Informational Lobbying and Political Contributions

  • Morten Bennedsen

    (Copenhagen Business School)

  • Sven E. Feldmann

    (University of Chicago)

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 favorable 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 identity 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 provision altogether and instead seek influence solely via contributions. Finally, we apply our model to cast doubt on the "conventional wisdom" that competition among information providers increases the amount of information provided: when the identified information externality is taken into account, we show that competition decreases information search. Thus, our analysis lends support to a rather cynical view of lobbying wherein lobby groups provide little or no useful information to the political process.

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Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2000-02.

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Length: 32 pages
Date of creation: Jun 2000
Date of revision:
Handle: RePEc:kud:kuieci:2000-02
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  1. Bennedsen Morten & Feldmann Sven E., 2002. "Lobbying and Legislative Organization: The Effect of the Vote of Confidence Procedure," Business and Politics, De Gruyter, vol. 4(2), pages 1-18, August.
  2. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659 Elsevier.
  3. David Austen-Smith, 1987. "Interest groups, campaign contributions, and probabilistic voting," Public Choice, Springer, vol. 54(2), pages 123-139, January.
  4. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  5. Maskin, Eric & Tirole, Jean, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 83-114, January.
  6. Paul R. Milgrom & John Roberts, 1985. "Relying on the Information of Interested Parties," Cowles Foundation Discussion Papers 749, Cowles Foundation for Research in Economics, Yale University.
  7. Besley, Timothy & Coate, Stephen, 2001. "Lobbying and Welfare in a Representative Democracy," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 67-82, January.
  8. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
  9. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
  10. Persson, T. & Tabellini, G., 1997. "Political Economics and Macroeconomic Policy," Papers 630, Stockholm - International Economic Studies.
  11. Baron, David P, 1989. "Service-Induced Campaign Contributions and the Electoral Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 45-72, February.
  12. Gilligan, Thomas W & Krehbiel, Keith, 1987. "Collective Decisionmaking and Standing Committees: An Informational Rationale for Restrictive Amendment Procedures," Journal of Law, Economics and Organization, Oxford University Press, vol. 3(2), pages 287-335, Fall.
  13. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  14. Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-69, August.
  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. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
  17. James M. Snyder, 1991. "On Buying Legislatures," Economics and Politics, Wiley Blackwell, vol. 3(2), pages 93-109, 07.
  18. Laffont, Jean-Jacques & Tirole, Jean, 1990. "The Politics of Government Decision Making: Regulatory Institutions," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 1-31, Spring.
  19. 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.
  20. Austen-Smith, David, 1994. "Strategic Transmission of Costly Information," Econometrica, Econometric Society, vol. 62(4), pages 955-63, July.
  21. Austen-Smith, David & Banks, Jeffrey S., 2002. "Costly signaling and cheap talk in models of political influence," European Journal of Political Economy, Elsevier, vol. 18(2), pages 263-280, June.
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