Lobbying, Information Transmission, and Unequal Representation

Abstract

We study the effects of unequal representation in the interest group system on the degree of information transmission between a lobbyist and a policymaker. Employing a dynamic cheap talk model in which the lobbyist cares instrumentally about his reputation for truthtelling, we show that the larger is the inequality, the less information can credibly be transmitted to the policymaker. We also investigate the effects of inequality on welfare and discuss the welfare effects of institutions that increase transparency but which as well, as an unintended side effect, lower the lobbyist's incentives for truthtelling.

Keywords: Lobbying, interest groups, reputation, information transmission, representation, inequality, bias

JEL Classification: D72, D78, D82