Political Biases in Lobbying under Asymmetric Information

Abstract

This paper introduces asymmetric information in a pluralistic model of interest groups competition and analyzes its impact on policy biases. Lobbying groups are uninformed on a decision maker's preferences and use nonlinear contributions not only to compete for the agent's services but also to learn about his preferences in an otherwise standard common agency model of lobbying. Asymmetric information can be either on the decision maker's ideal point (horizontal differentiation) or on the strength of his own preferences for ideology (vertical differentiation). At equilibrium, asymmetric information redistributes bargaining powers between interest groups and the decision maker in non‐trivial ways that may depend on the kind of informational asymmetry which is postulated. Asymmetric information tends to mitigate the influence of interest groups and contributions might be significantly reduced. Interest groups no longer contribute for a change in policy what it is worth to them as under complete information. Contributions incorporate a discount related to the group's ability to solve the asymmetric information problem. (JEL: D72, D82)

Does transparency reduce political corruption?

“…The second one is the common agency model first devised by Bernheim and Whinston (, b) and further developed as a branch of the lobbying literature by Grossman and Helpman (, ), Le Breton and Salanié (), and Martimort and Semenov (). Within a common agency, many principals (the interest groups) compete to influence an agent by offering monetary transfers.…”

If You Cannot Get Your Friends Elected, Lobby Your Enemies

“…6. The extent to which lobbies care about money over policy plays a crucial role also in other papers on lobbying, see, for example, Martimort and Semenov (2007). parameter λ in the citizens' preferences.…”

What's the damage? Environmental regulation with policy‐motivated bureaucrats

“…In the context of the political‐agency literature, the mixed motivation of policy outcomes and payments has been modeled, for instance, by Le Breton and Salanie () and Martimort and Semenov (, b, ). In these papers, the “payment” component comes from contributions offered by lobby groups in exchange for a favorable policy.…”