Sincere Lobby Formation

Galina Zudenkova ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes endogenous lobbying over a unidimensional policy issue. Individuals differ in policy preferences and decide either to join one of two opposite interest lobbies or not to take part in lobbying activities. Once formed, lobbies make contributions to the incumbent government in exchange for a policy favor as in a common-agency model. A "sincere-lobby-formation" condition for equilibrium is introduced: an individual joins a lobby if their gain from the policy change that this lobby might achieve exceeds a contribution fee. Thus, an equilibrium occurs only if no lobby member would prefer their lobby to cease to exist. I show the existence of an equilibrium with two organized lobbies. Individuals with more extreme preferences are more likely to join lobbying activities. I find that lobbying somewhat moderates the government's preferences, i.e., it shifts the final policy in favor of individuals who are initially disadvantaged by the government's pro- or anti-policy preferred position. Under a utilitarian government, however, lobbying does not affect the final policy, and political competition results in a socially optimal outcome.

Keywords: Sincere lobby formation; common agency; endogenous lobbying. (search for similar items in EconPapers)
JEL-codes: D72 (search for similar items in EconPapers)
Date: 2010-05-01
New Economics Papers: this item is included in nep-cdm and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28249

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