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A Simple Model of the Commercial Lobbying Industry

  • Groll, Thomas
  • Ellis, Christopher J.

In this paper we present a model of the behavior of commercial lobbying firms (such as the so-called K-Street lobbyists of Washington, D.C.). In contrast to classical special interest groups, commercial lobbying firms represent a variety of clients and are not directly affected by policy outcomes. They are hired by citizens, or groups of citizens, to advocate on their behalf to policymakers. In our analysis we address two basic questions; why do commercial lobbying firms exist, and what are the implications of their existence for social welfare? We answer the first part of this question by proposing that commercial lobbying firms possess a verification technology that allows them to improve the quality of information concerning the social desirability of policy proposals. This gives policymakers the incentive to allocate their scarce time to lobbying firms. Essentially it is this access to policymakers that lobbying firms sell to their clients. To address the question of social welfare we construct a simple general equilibrium model that includes commercial lobbying firms, and compare the equilibrium obtained under market provision of lobbying services to the first best optimum. We find that the market level of lobbying services can be socially either too large or too small, and characterize when each will be the case.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36168.

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Date of creation: Jan 2012
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Handle: RePEc:pra:mprapa:36168
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  1. Bengt Holmstrom, 1997. "Moral Hazard and Observability," Levine's Working Paper Archive 1205, David K. Levine.
  2. Matthias Dahm & Nicolás Porteiro, 2008. "Informational lobbying under the shadow of political pressure," Social Choice and Welfare, Springer, vol. 30(4), pages 531-559, May.
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  4. Lohmann, Susanne, 1995. " Information, Access, and Contributions: A Signaling Model of Lobbying," Public Choice, Springer, vol. 85(3-4), pages 267-84, December.
  5. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Thomas Groll & Christopher J. Ellis, 2013. "A Simple Model of the Commercial Lobbying Industry," CESifo Working Paper Series 4110, CESifo Group Munich.
  7. repec:oup:restud:v:68:y:2001:i:1:p:67-82 is not listed on IDEAS
  8. Christopher Cotton, 2008. "Should We Tax or Cap Political Contributions? A Lobbying Model with Policy Favors and Access," Working Papers 0901, University of Miami, Department of Economics.
  9. Bennedsen, Morten & Feldmann, Sven E., 2006. "Informational lobbying and political contributions," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 631-656, May.
  10. Marianne Bertrand & Matilde Bombardini & Francesco Trebbi, 2011. "Is It Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process," NBER Working Papers 16765, National Bureau of Economic Research, Inc.
  11. Bennedsen, Morten & Feldmann, Sven E., 2000. "Lobbying Legislatures," Working Papers 07-2000, Copenhagen Business School, Department of Economics.
  12. Jean-Jacques Laffont & Jean Tirole, 1988. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," Working papers 506, Massachusetts Institute of Technology (MIT), Department of Economics.
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  14. 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.
  15. 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.
  16. Vijay Krishna & John Morgan, 2001. "A Model of Expertise," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 747-775.
  17. 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.
  18. Jordi Blanes i Vidal & Mirko Draca & Christian Fons-Rosen, 2012. "Revolving Door Lobbyists," American Economic Review, American Economic Association, vol. 102(7), pages 3731-48, December.
  19. Thomas Groll & Christopher J. Ellis, 2013. "Dynamic Commercial Lobbying," CESifo Working Paper Series 4114, CESifo Group Munich.
  20. Austen-Smith, David, 1994. "Strategic Transmission of Costly Information," Econometrica, Econometric Society, vol. 62(4), pages 955-63, July.
  21. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
  22. Potters, Jan & van Winden, Frans, 1992. " Lobbying and Asymmetric Information," Public Choice, Springer, vol. 74(3), pages 269-92, October.
  23. Mathias Dewatripont & Patrick Bolton, 2005. "Contract theory," ULB Institutional Repository 2013/9543, ULB -- Universite Libre de Bruxelles.
  24. Gromb, Denis & Martimort, David, 2007. "Collusion and the organization of delegated expertise," Journal of Economic Theory, Elsevier, vol. 137(1), pages 271-299, November.
  25. 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.
  26. Jordi Blanes i Vidal & Mirko Draca & Christian Fons-Rosen, 2010. "Revolving Door Lobbyists," CEP Discussion Papers dp0993, Centre for Economic Performance, LSE.
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