Taking Advice from Imperfectly Informed Lobbyists: When to Match Hawks with Hawks

Lars Frisell
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Lars Frisell: Dept. of Economics, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden

No 355, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: In this paper we study a sender-receiver game between an uninformed government and two informed lobbyists. There is a conflict of interest between government and lobbyists in the sense that the government's payoff is state-dependent while lobbyists prefer a certain policy irrespective of the contingency. Hence, lobbyists' recommendations cannot be trusted a priori and a single lobbyist will convey no information in equilibrium. When two or more lobbyists interact non-cooperatively, matters improve. Our main result is that, contrasting previous results, homogeneous panels may be preferred to a heterogeneous one. If lobbyists are perfectly informed the first-best equilibrium exists even when the game has cheap talk. Moreover, if inaccurate messages impose a cost on the sender, i.e., if lobbyists care about their prestige, the assumption of perfectly informed advisors is not necessary to sustain truthtelling. In other words, reputational concerns work as a substitute for informational precision.

Keywords: Heterogeneous vs. homogeneous panels; informational efficiency; reputation; external forces (search for similar items in EconPapers)
JEL-codes: D71 D82 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2000-02-03
New Economics Papers: this item is included in nep-cdm, nep-ind and nep-mic
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Citations: View citations in EconPapers (1)

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