Policy Bias Equivalence under Common Agency

This paper studies interest group influence on policy making. Lobbying occurs in a first price auction where an interest group wins with certainty, if her bid exceeds the loser's bid by the policy maker's valuation for the socially best policy. Otherwise the latter implements the privately...

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Bibliographic Details
Published in:Journal of economics (Vienna, Austria) Austria), 2007-04, Vol.90 (3), p.295-312
Main Author: Felgenhauer, Mike
Format: Article
Language:English
Subjects:
Auctions
Bias
Bidding
Bids
Bribery
Economic competition
Economic equilibrium
Economic policy
Economic theory
Equilibrium
Equilibrium models
Expected utility
Games
Influence
Information economics
Interest groups
Lobbying
Mixed strategy
Policy making
Political economy
Political interest groups
Politicians
Studies
Valuation
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Summary:This paper studies interest group influence on policy making. Lobbying occurs in a first price auction where an interest group wins with certainty, if her bid exceeds the loser's bid by the policy maker's valuation for the socially best policy. Otherwise the latter implements the privately known best policy. In equilibrium the size of the policy maker's valuation does not matter for the size of the policy bias. The idea is to construct a "reference game" and to shift the support of the equilibrium mixed strategies into the original game, without altering the structure of the densities.
ISSN:0931-8658
1617-7134
DOI:10.1007/s00712-006-0239-x