How a firm can induce legislators to adopt a bad policy
This paper shows why a majority of legislators may vote for a policy that benefits a firm but harms all legislators. The firm may induce legislators to support the policy by suggesting that it is more likely to invest in a district where voters or their representative support the policy. In equilibrium, no one vote may be decisive, so each legislator who seeks the firm’s investment votes for the policy, though all legislators would be better off if they all voted against the policy. And when votes reveal information about the district, the firm’s implicit promise or threat can be credible. Unlike influence mechanisms based on contributions or bribes, the behavior considered is time consistent and in line with the low campaign contributions by special interests.
KeywordsLobbying Voting Special interests Credibility
We thank three referees, the editor of the journal, seminar audiences at the University of California–San Diego and at the Katholieke Universiteit Leuven for helpful discussions and suggestions. The usual disclaimer applies. Dahm conducted this work while visiting the University of California, Irvine. Its hospitality, and financial support through the Spanish program José Castillejo, is gratefully acknowledged. Dahm acknowledges the support of the Barcelona Graduate School of Economics, of the Government of Catalonia, and of the Government of Spain under projects SEJ2007-67580-C02-01 and ECO2010-19733.
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