Professor of Economics
Lobbying; Political contributions; Asymmetric information; Common agency;
Journal Article | Journal of Public Economics | 90 | May 2006
Informational Lobbying and Political Contribution
Interest groups can potentially influence political decision-makers by offering contributions and by providing relevant information that sways the decision in the group's favor. What mix of these two instruments should an interest group choose, and how does the use of one instrument affect the effectiveness of the other?In this paper the authors identify an information externality that raises the cost of offering contributions and show that this indirect search cost reduces the group's incentive to gather information when contributions are allowed.Furthermore, the authors analyze how competition among lobby groups as providers of information and contributions affect the choice and effectiveness of the instruments.The authors show that the information externality rewards the group that can abstain from information search and focus its influence on contributions.