Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/269430 
Year of Publication: 
2016
Series/Report no.: 
FERDI Working Paper No. P149
Publisher: 
Fondation pour les études et recherches sur le développement international (FERDI), Clermont-Ferrand
Abstract: 
We set up a model of costly information production between two lobbies, a firm and a consumer group, competing for influence over an imperfectly informed but benevolent government. The government is endowed with a parametric amount of information and chooses the best policy from a finite, countable feasible set given the information available (its own and that forwarded by lobbies). Lobbies have asymmetric preferences, the firm being a "high-stakes" player with relatively extreme preferences and the consumer group a "low-stakes" player with preferences more aligned with the government's. We show that lobbies spend too much on information production in any Nash equilibrium despite a timing-game structure in which the lobbies are free to choose the order of play. We also show that in some parameter configurations, the firm insures against a consumer win by forwarding unbiased information to the government, in spite of its own extreme preferences and high stakes. The resulting informational rent enables the government to adopt moderate policies aligned with its own (i.e. societal) preferences, suggesting a new way in which lobby competition can produce good policies even when the government is imperfectly informed.
Subjects: 
Game theory
lobbying model
imperfect information
timing game
JEL: 
H4
K0
P1
D72
F13
Document Type: 
Working Paper

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