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Lobbying, Information Transmission, and Unequal Representation

Author

Listed:
  • Johan Lagerlöf
  • Lars Frisell

Abstract

We study the effects of unequal representation in the interest-group system on the degree of information transmission between a lobbyist and a policymaker. Employing a dynamic cheap-talk model in which the lobbyist cares instrumentally about his reputation for truthtelling, we show that the larger is the inequality, the less information can credibly be transmitted to the policymaker. We also investigate the effects of inequality on welfare and discuss the welfare effects of institutions that increase transparency but which as well, as an unintended side-effect, lower the lobbyist’s incentives for truthtelling. ZUSAMMENFASSUNG - (Lobbying, Informationsübertragung und ungleiche Repräsentation) In diesem Papier wird untersucht, welche Wirkung die ungleiche Repräsentation in einem Interessengruppensystem auf den Grad an Informationsübertragung zwischen einem Lobbyisten und einem Politiker hat. Es wird ein dynamisches Modell für 'Cheap-talk' verwendet, in dem angenommen wird, dass der Lobbyist Wert auf seine Reputation als aufrichtiger Informationsvermittler legt. Dabei kann gezeigt werden, dass je größer die Ungleichheit im System, dem Politiker umso weniger Information glaubwürdig übermittelt werden kann. Darüber hinaus wird die Wohlfahrtswirkung der Ungleichheit untersucht und diskutiert, welche Effekte solche Institutionen haben, die zwar einerseits die Transparenz erhöhen, mit unerwünschtem Nebeneffekt aber den Anreiz für Lobbyisten, Informationen wahrheitsgemäß weiterzugeben, verringern.

Suggested Citation

  • Johan Lagerlöf & Lars Frisell, 2004. "Lobbying, Information Transmission, and Unequal Representation," CIG Working Papers SP II 2004-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  • Handle: RePEc:wzb:wzebiv:spii2004-02
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    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
    2. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
    3. Roland Benabou & Guy Laroque, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 921-958.
    4. Vijay Krishna & John Morgan, 2001. "A Model of Expertise," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 747-775.
    5. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    6. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
    7. repec:cup:apsrev:v:89:y:1995:i:03:p:566-581_09 is not listed on IDEAS
    8. Joel Sobel, 1985. "A Theory of Credibility," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 557-573.
    9. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    10. Lagerlof, Johan, 1997. "Lobbying, information, and private and social welfare," European Journal of Political Economy, Elsevier, vol. 13(3), pages 615-637, September.
    11. Potters, Jan & van Winden, Frans, 1992. "Lobbying and Asymmetric Information," Public Choice, Springer, vol. 74(3), pages 269-292, October.
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    More about this item

    Keywords

    Lobbying; interest groups; reputation; information transmission; representation; inequality; bias;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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