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Lobbying Mechanisms

Part of the Studies in Political Economy book series (POEC)

Abstract

Political influence of special interests is a rich phenomenon, challenging for both theory and empirics. One of the key questions is whether the influence is through the provision of money, information, or both. In the first generation of empirical studies, the monetary channel is examined by looking upon the effect of campaign contributions through Political Action Committees on roll call voting. The results of the roll call voting studies conducted in the United States since 1970s are nevertheless inconclusive. Even descriptive evidence suggests that campaign contributions through Political Action Committees are not as important as direct individual contributions (Ansolabehere et al. 2003).

Keywords

  • Cheap Talk
  • Campaign Contribution
  • Mandatory Disclosure
  • Political Action Committee
  • Default Policy

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Notes

  1. 1.

    Typically, the prize is considered a private good, but even collective goods can be covered as long as the net benefit is independent on the winner.

  2. 2.

    Like most of the literature, we cover only the polar cases with zero or infinite ‘cost of absorption’ of a message. Intermediate cases of positive but finite cost are covered in Dewatripont and Tirole (2005) and the subsequent papers.

  3. 3.

    Signaling refers to any interaction when a privately informed agent sends signals contingent on his or her type to an uninformed agent. Hence, it contains also cheap talk and disclosure games. In a narrow sense, signaling is used only for setting where utility varies with signals (hence signal costs exist) and where the informed agent’s utility is monotonic in the signals and actions. Both of these assumptions are violated for typical models of costless communication.

  4. 4.

    The preference structure has important consequences. For monotonic lobby’s preferences (invariant to states), a single-dimensional cheap talk is uninformative as all lobby’s types would send the same message that implements the most favorable policy. Monotonicity therefore restricts the modeler to communication with verifiable evidence and/or to evidence production. In other words, the preference structure (having a conflict or not having a conflict between the lobby’s types) is typically related also to the informational structure.

  5. 5.

    Notice that even if the lobby may have a different posterior than the policy-maker, we must use the policy-maker’s posterior. The reason is that the value of a mechanism is an ex ante expected value evaluated at μ 0, where information is symmetric, hence the lobby’s ex ante belief conditional on learning that the policy-maker will have μ belief must also be μ.

  6. 6.

    Notice that convexity or quasi-convexity of the lobbyist’s (Sender’s) payoffs is a recurrent topic in the communication literature (cf., Chakraborty and Harbaugh 2010).

  7. 7.

    One option to avoid an inconvenient step-wise indirect utility is to let the policy-maker’s optimal policy be stochastic in posteriors on fundamentals (Dahm and Porteiro 2008a). For example, suppose the states of the world are characterized by two independent dimensions, a fundamental dimension θ and a policy-maker’s type r (e.g., ideology, risk aversion, or relative weights attached to contributions). The policy-maker type is private information that only influences v(⋅ ), but no other payoff, and the policy-maker cannot communicate his/her type. A persuasion mechanism is invariant to the policy-maker’s type, hence implies a distribution of posteriors where the densities are constant in the type-dimension, and we may let μ(θ): = μ(θ, r). Then, discontinuity in U(μ) may disappear, since each d (μ(θ)) is constructed as an expected policy from a continuous distribution of policy-maker types, not as a (deterministic) policy of a single policy-maker with a known type r. An important corollary is that the value of the persuasion mechanism in the presence of uncertainty over the policy-maker’s type hinges on concavities and convexities in the distribution F(r). Typically, an assumption of the uniform distribution of the policy-maker’s types is applied as in the literature on the communication design. Rayo and Segal (2010) manage to characterize several properties of the optimal communication mechanisms under special assumptions that the policy-maker’s action space is binary ({d l , d h }) and that the policy-maker’s action is affected by noise to the policy-maker’s values, and the noise has a uniform distribution.

  8. 8.

    The body of evidence on the allocation of access through connected intermediaries is growing. Blanes-i-Vidal et al. (2012) measure the value of a political connection for revolving-door lobbyists who were previously congressional staffers. Specifically, by measuring how the exit of a former employer affects their payoff, they observe the premium for connections at above 20 %, and the premium lasts for over 3 years. Bertrand et al. (2014) compare the connection premium with the expertise premium using price tags per report. From price tags per report, the report-level analysis reveals that (1) the premium of having a relevant specialist in the report is 3–5 % and (2) the premium of having a relevant connected lobbyist is 8–10 %. Estimating the value of a lobbyist’s political connections from stock markets is another strategy. Gely and Zardkoohi (2001) study firms that retain law firms as lobbyists. The firms show abnormal gains when one of the partners at that firm obtains a federal cabinet position which disappear when anti-lobbying laws are enacted.

  9. 9.

    Typically, all information is revealed to the lobby. A modified case is when the lobby has only partial advantage of knowing her bias (Austen-Smith 1995; Lohmann 1993).

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Acknowledgements

I would like to thank participants at ICOPEAI 2015 for their useful comments. An early version of the paper circulated under the title ‘Corporate lobbying: a review of the recent literature’ (Gregor 2011). Financial support from the Grant Agency of the Czech Republic No. P402/12/G097 is gratefully acknowledged.

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Gregor, M. (2017). Lobbying Mechanisms. In: Schofield, N., Caballero, G. (eds) State, Institutions and Democracy. Studies in Political Economy. Springer, Cham. https://doi.org/10.1007/978-3-319-44582-3_2

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