Lottery Versus All-Pay Auction Models of Lobbying

I first provide a complete characterizationof the unique equilibrium of thelottery game by n lobbyists with asymmetricvaluations, and then compare the lotteryand the all-pay auction models of lobbying.I show that the exclusion principlediscovered by Baye, Kovenock and de Vries(1993) for all-pay auction does not applyto lottery. I also show that the perverse effectthat an exogenous cap may increase thetotal lobbying expenditure in a two-bidderall-pay auction discovered by Che and Gale(1998) does not apply to lottery.     

A correction to Potters and van Winden (1992)

This note amends the model of informational lobbying presented in Potters and van Winden (Public Choice 74:269–292, 1992). In the original article, the authors find that only separating and pooling equilibria exist when the cost of lobbying is intermediate and the policymaker’s prior favors the interest group’s preferred policy. However, we prove that a semi-separating equilibrium also exists under these conditions. Implications for lobbying behavior are discussed.     

Lobbying and asymmetric information

Informational lobbying — the use by interest groups of their (alleged) expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies — is often regarded as an important means of influence. This paper analyzes this phenomenon in a game setting. On the one hand, the interest group is assumed to have private information which is relevant to the policymaker, whilst, on the other hand, the policymaker is assumed to be fully aware of the strategic incentives of the interest group to (mis)report or conceal its private information. It is shown that in a setting of partially conflicting interests a rationale for informational lobbying can only exist if messages bear a cost to the interest group and if the group's preferences carry information in the ‘right direction’. Furthermore, it is shown that it is not the content of the message as such, but rather the characteristics of the interest group that induces potential changes in the policymaker's behavior. In addition, the model reveals some interesting results on the relation between, on the one hand, the occurrence and impact of lobbying and, on the other hand, the cost of lobbying, the stake which an interest group has in persuading the policymaker, the similarity between the policymaker's and the group's preferences, and the initial beliefs of the policymaker. Moreover, we relate the results to some empirical findings on lobbying. qu]Much of the pressure placed upon government and its agencies takes the form of freely provided “objective” studies showing the important outcomes to be expected from the enactment of particular policies (Bartlett, 1973: 133, his quotation marks). qu]The analysis here is vague. What is needed is an equilibrium model in which lobbying activities have influence. Incomplete information ought to be the key to building such a model that would explain why lobbying occurs (information, collusion with decision makers, and so on) and whether lobbying expenses are socially wasteful. (Tirole, 1989: Ch. 1.3, p. 77, Rentseeking behavior).     

Lobbying when the decisionmaker can acquire independent information

Politicians trade off the cost of acquiring and processing information against the benefit of being re-elected. Lobbyists may possess private information upon which politicians would like to rely without the effort of verification. If the politician does not try to verify, however, the lobbyist has no incentive to be truthful. This is modelled as a game in which the lobbyist lobbies to show his conviction that the electorate is on his side. In equilibrium, sometimes the politician investigates, and sometimes the information is false. The lobbyists and the electorate benefit from the possibility of lobbying when the politician would otherwise vote in ignorance, but not when he would otherwise acquire his own information. The politician benefits in either case. Lobbying is most socially useful when the politician's investigation costs are high, when he is more certain of the electorate's views, and when the issue is less important.     

Lobbying and (de)centralization

This paper presents a positive theory of (de)centralization of policy decisions in an international union -defined as a supranational jurisdiction that may exercise a policy prerogative on behalf of member countries. I build a benchmark model where national lobbies can coordinate (i.e. form a trans-national lobby) at no cost and show that lobbying does not affect the fiscal regime. On the other hand, when interest groups cannot coordinate, decentralization emerges as a political equilibrium with lobbying. Policy centralization hurts national lobbies by increasing competition for influence. At a constitutional stage, interest groups induce politically motivated governments to reject centralization. Three extensions show that this result depends on the level of cross-border externalities; the voting rule at the constitutional stage; and the details of the institutional decision mechanism under centralization.     

Choosing among signalling equilibria in lobbying games: A reply to Sloof

Randolph Sloof has written a comment on the lobbying-as-signalling model in Rasmusen (1993) in which he points out an equilibrium I missed and criticizes my emphasis on a particular separating equilibrium (see this issue). In this response, I discuss how to interpret multiple equilibria in games and how to interpret mixed strategy equilibria in which two types of player with identical incentives must pick different mixing probabilities.     

Social heterogeneity and wasteful lobbying

Using a general equilibrium model with endogenous policy, we explore how heterogeneity affects wasteful lobbying by sectoral interest groups. With the help of a simulation approach, we first investigate the impact of information heterogeneity on how lobbies react to a shift from a soft to a strict government budget constraint. Next, we examine how lobbying is influenced by heterogenous perception of the general equilibrium implications of lobbying effort. Finally, we explore the consequences of heterogenous specialization in households' asset portfolios. We conclude that social heterogeneity in information, perceptions, and portfolio compositions increases incentives to lobby.     

Governmental behavior in representative democracy: a synthesis of the theoretical literature

What is the impact of bureaucratic behaviors on tax rates? What is preferable: a bureaucrat or a partisan politician? Does a flypaper effect occur when lobby groups influence public policies? This article tries to answer these questions by analyzing and comparing six different models of public choice: (1) the median voter model, (2) the Leviathan model, (3) the slack-maximizing model, (4) a general model of bureaucracy, (5) the partisan politicians model and (6) a general model of lobbying. Among several results, it is shown that the median voter’s income and tax share almost always play a significant role in the design of the public good/tax package, even if the government does not explicitly try to maximize the median voter’s utility. The article also provides a synthesis of the positive analysis of the flypaper effect.     

Public good provision in a repeated game: The role of small fixed costs of participation

Pecorino (1998) models tariff lobbying in a repeated game and finds that cooperation can be maintained in a large group, even though tariff lobbying provides a rival public good to interest group members. We add small fixed costs of participation to this model and find that cooperation must break down in large groups. By contrast, if a fully rival public good directly enters the utility function, then cooperation is possible in large groups, even with small participation costs. Thus, we find only partial support for Olson’s (1965) proposition that collective action must break down in large groups.     

Balancing inside and outside lobbying: The political strategies of lobbyists at global diplomatic conferences

This article seeks to explain the use of inside and outside lobbying by organised interests at global diplomatic conferences. At first sight, the lobbying at these venues is puzzling as it does not seem to be a very fruitful way to acquire influence. The use of outside strategies especially is perplexing because most aspects of international negotiations fall outside of the purview of national constituencies. It is argued in this article, however, that the presence of outside lobbying is not so puzzling if lobbying is seen both as a way to attain influence and as a way to pursue organisational maintenance goals. Empirically, the article draws on interview data with 232 interest group representatives that participated at either the 2012 session of the World Trade Organization (WTO) Ministerial Conference in Geneva, or the 2011 (Durban) and 2012 (Doha) United Nations Climate Conferences. The analysis demonstrates that organisational needs, and especially the competition actors face in obtaining resources, significantly affects the relative focus of organised interests on inside and outside lobbying.     

The dynamics of lobbying — A differential game

This paper presents a dynamic model on lobbying. The interactions between two competing lobbies, who attempt to influence regulations and legislation, are modelled as a differential game. We consider for this game first a time consistent and then a subgame perfect equilibrium (in linear Markov strategies). The subgame perfect equilibrium lowers considerably lobbying activity and expenses. This provides a partial explanation of the puzzle that rent-seeking expenses are often small compared with the prize sought.     

Going once, going twice, sold! The committee assignment process as an all-pay auction

I analyze the committee assignment process as an all-pay auction and derive equilibrium lobbying strategies of legislators competing for vacant seats on a committee. The model illustrates the relationship between sincere and revealed preferences, which earlier formal models of committee assignment do not explicitly consider. Incorporating seniority, party loyalty, effort constraints, or committee transfers can discourage those who highly value the assignment from competitively lobbying for the seat. I also offer an alternative interpretation of the model’s parameters to consider the pure partisan assignment model, where efforts are contributions to the party’s collective good.     

Policy Reform and the Free-Rider Problem

We investigate policy reform in a modelwith both lobbying, which involves afree-rider problem, and ordinary rentseeking, which does not. These activitiesinvolve similar skills, so a reform whichreduces rents shifts labor into lobbying.Also, because of the free-rider problem,the marginal return to the industry fromlobbying may greatly exceed an individualfirm's return to lobbying. Thus, the shiftinto lobbying caused by rent reduction maylead to large increases in transfers to thelobbying industry. Under somecircumstances, a reform which reducesavailable rents increases total rents plustransfers to the industry.     

Traveling frames: How corporate and civil society actors try to influence public administration and courts in a case on nuclear emission data in Switzerland

This paper focuses on the framing strategies lobbyists apply to influence public policy in a case on nuclear emission data in Switzerland. Framing analysis is at the heart of communication science and has been applied in lobbying settings, but framing theory has not yet been fine‐tuned to the specificities of public affairs research. This qualitative case study gives insights into the dominant frames seven actors ranging from corporations to nongovernmental organizations to public institutions employ to defend a legal court case in the nuclear power industry. The results of the document analysis and the interviews show that frames travel among diverse actors and only some are picked up by the courts, at times stating a position opposite to the one initially intended by the frame sponsor. A public affairs‐specific integrated process model of framing is presented that views the media in the role of a moderator in the framing process and pronounces the lobbying organizations' strategic goals, the different stakeholders as target audiences, and the outcomes of the public affairs process.     

Show Them Your Teeth First!

This paper investigates the choice of an interestgroup between lobbying (``words'') and pressure(``actions'') in order to influence a policymaker. Both lobbying and pressure are modeled asstrategic means of transmitting information that isrelevant to the policymaker. However, only pressure isdirectly costly to the policymaker. The interactionbetween the interest group and the policymaker isframed as a repeated signaling game. In equilibriumpressure – in contrast to lobbying – only occurswhen the interest group's reputation is sufficientlylow, and always improves its reputation. It is shownthat (repeated) lobbying cannot completely substitutefor pressure, and that the interest group may beforced to sustain its reputation through lobbying. Weconclude that pressure is typically used to build upa reputation, lobbying to maintain a reputation.     

The ‘Old’ and ‘New’ Political Economy of Hedge Fund Regulation in the European Union

The traditional literature on interest group behaviour presumes that private interests develop lobbying strategies based on the principle of effective allocation of resources. However, nearly 400 private interest groups actively lobby the Council of Europe, a classical intergovernmental organisation with weak decision-making powers, where no significant policy pay-off is expected to occur. This analysis aims to explain the seeming puzzle of private interest groups seeking to influence an institution which is generally perceived as having no strong decision-making powers in European political space. It does so by exploring three explanations from the existing literature, namely ‘policy overlap’, ‘venue shopping’ and ‘epistemic community’, and considers another explanation not hitherto fully developed, suggesting that the ‘ideological motivation’ of interest groups helps to explain their behaviour. Taking the ideological motivation of interest groups into account when analysing lobbying strategies can in fact shed light on certain lobbying preferences that would otherwise appear to defy the logic of interest representation. This paper therefore suggests that an ‘ideological motivation’ explanation potentially plays a crucial role in the analysis of the behaviour of any interest group.     

Politician preferences, law-abiding lobbyists and caps on political contributions

The effect of a contribution cap is analyzed in a political lobbying game where the politician has a policy preference. In contrast to the previous literature without politician policy preferences, more restrictive binding caps always reduce expected aggregate contributions. However the initial imposition of a cap increases contributions if the politician mildly favors the low-valuation lobbyist’s policy. The introduction of policy preferences permits analysis of monied interests’ policy influence. A more restrictive cap makes it more likely that the politician enacts the policy he would have enacted in the absence of lobbying, even in cases where expected aggregate contributions increase.     

The All-Pay Auction When a Committee Awards the Prize

There is very little work on the equilibrium of the all-payauction when the prize is awarded by two or more people. Iconsider an all-pay auction under committee administrationwith caps on the bids of the contestants. I show that for anynumber of committee members and contestants, there exists apure-strategy equilibrium in which the contestants bid anamount equal to a suitably chosen cap. I argue that the cap isnot an artificial restriction on the game, given that thereare caps on political lobbying in the real world. I find thatcommittee administration could result in higher aggregateexpenditures, even if there is some probability that thecommittee will not award the prize. The intuition for thisresult is that the inclusion of additional administratorsrelaxes the effect of caps on lobbying. That is, caps onlobbying tend to be more effective the smaller is the size ofthe committee. Caps may also be a solution to the problem ofmajoritarian cycles in all-pay auctions under committeeadministration.     

Determinants of Firm‐Level Lobbying and Government Responsiveness in Agricultural Biotechnology in China

Understanding what stimulates agribusiness firms to lobby the government and what makes the government responsive to lobbying are the two issues that have been discussed extensively in the debates concerning determinants of biotechnology policy. This paper examines the factors influencing agribusiness firms' lobbying and government response using econometric modeling on a new data set of 160 leading agribusiness firms in the food, feed, chemical, and seed industries in China. The results show that approximately 10% of agribusiness firms lobbied the government about biotechnology policy and regulations and over half of those that lobbied received a verbal or written acknowledgment from government agencies. Seed and feed companies are more likely to engage in lobbying than chemical companies. Owning GM patents not only has a positive impact on firms' lobbying activities, but firms with these patents are more likely to receive a government response to their lobbying efforts. The experience of selling GM products does not significantly influence lobbying activities or response from the government.     

Rent-seeking with non-identical sharing rules: An equilibrium rescued

Nitzan's (1991) analysis of differential sharing rules in a collective rent-seeking setting is reconsidered. Two groups, each with more than one member, are presumed to use different linear combinations of two sharing rules, one based on an equal-division of the prize, and the other on each member's relative effort. We show that an equilibrium always exists for this type of game, and then characterize the equilibrium. Our result is contrary to Nitzan's claims that (a) in the general case an equilibrium often does not exist, and (b) an equilibrium never exists when the groups use the polar extreme rules.