The Informational Effects of Competition and Collusion in Legislative Politics

David Martimort and Aggey Semenov

MPRA Paper from University Library of Munich, Germany

Abstract: We use a mechanism design approach to study the organization of interest groups in an informational model of lobbying. Interest groups influence the legislature only by communicating private information on their preferences and not by means of monetary transfers. Interest groups have private information on their ideal points in a one-dimensional policy space and may either compete or adopt more collusive behaviors. Optimal policies result from a trade-off between imposing rules which are non-responsive to the groups' preferences and flexibility that pleases groups better. Within a strong coalition, interest groups credibly share information which facilitates communication of their joint interests, helps screening by the legislature and induces flexible policies responsive to the groups' joint interests (an informativeness effect). Competing interest groups better transmit information on their individual preferences (a screening effect). The socially and privately optimal organization of lobbying favors competition between groups only when their preferences are not too congruent with those of the legislature. With more congruence, a strong coalition is preferred. Finally, within a weak coalition, interest groups must design incentive compatible collusive mechanisms to share information. Such weak coalitions are always inefficient.

Keywords: Communication Mechanisms; Lobbying; Competition; Coalition; Legislative Politics (search for similar items in EconPapers)
JEL-codes: D72 D8 (search for similar items in EconPapers)
Date: 2008-02-01
New Economics Papers: this item is included in nep-cdm, nep-cta and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Journal Article: The informational effects of competition and collusion in legislative politics (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:6989

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