"Favors" for Sale: Strategic Analysis of a Simple Menu Auction with Adverse Selection

Didier Laussel () and Michel Breton
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Michel Breton: Universite de Toulouse 1 Gremaq-Idei

Annals of Economics and Finance, 2005, vol. 6, issue 1, 53-73

Abstract: We study the distribution of a fixed amount of "favors" by an incumbent politician between two pressure groups, each of them offering to the agent a campaign contribution contingent on the quantity of "favors" received. Assuming that the total amount supplied is a private information of the politician the equilibrium contribution schedules are fully characterized. It is shown that the principals net equilibrium payoffs are larger the more quickly their marginal valuations of the favors decrease with the amount received. The equilibrium allocation of the stock of "favors" is efficient if the interest group utility functions are identical.

Keywords: Menu auction; Adverse selection (search for similar items in EconPapers)
JEL-codes: C70 D72 L50 (search for similar items in EconPapers)
Date: 2005
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Working Paper: Favors for Sale: Strategic Analysis of a Simple Menu Auction with Adverse Selection (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2005:v:6:i:1:p:53-73

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