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Informational Lobbying under the Shadow of Political Pressure

  • Matthias Dahm
  • Nicolas Porteiro

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 induced risk preference determines the optimal lobbying behavior. Our approach gives a novel explanation for the fact that interest groups often try to provide information credibly. We identify several factors that induce risk proclivity (and thus information provision). We also show that the availability of political pressure might have a deterrence effect on information provision. This ‘shadow of political pressure’ might impede information provision at all or induce a complementary relationship between both lobbying instruments.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1409.

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Date of creation: Jul 2005
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Handle: RePEc:nwu:cmsems:1409
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  1. Bennedsen, Morten & Feldmann, Sven E., 2000. "Informational Lobbying And Political Contributions," Working Papers 08-2000, Copenhagen Business School, Department of Economics.
  2. DAHM, Matthias & PORTEIRO, Nicolas, 2003. "The political economy of interest groups: pressure and information," CORE Discussion Papers 2003057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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.
  4. 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.
  5. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
  6. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. 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.
  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. 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.
  10. 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.
  11. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  12. Hyun Song Shin, 2001. "Disclosures and Asset Returns," FMG Discussion Papers dp371, Financial Markets Group.
  13. repec:dgr:kubcen:200244 is not listed on IDEAS
  14. Matthias Dahm & Nicolas Porteiro, 2005. "Side Effects of Campaign Finance Reform," Discussion Papers 1408, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. James M. Snyder, 1991. "On Buying Legislatures," Economics and Politics, Wiley Blackwell, vol. 3(2), pages 93-109, 07.
  16. Susanne Lohmann, 1995. "A Signaling Model Of Competitive Political Pressures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 181-206, November.
  17. 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.
  18. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  19. Lohmann, Susanne, 1995. " Information, Access, and Contributions: A Signaling Model of Lobbying," Public Choice, Springer, vol. 85(3-4), pages 267-84, December.
  20. Laffont, Jean-Jacques, 1999. "Political economy, information and incentives1," European Economic Review, Elsevier, vol. 43(4-6), pages 649-669, 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.
  22. Laffont, J.-J., 1999. "Political Economy, Information and Incentives," Papers 99.516, Toulouse - GREMAQ.
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