Lobbying and Compromise

24 Pages Posted: 18 Feb 2005

See all articles by Shmuel Nitzan

Shmuel Nitzan

Bar-Ilan University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gil S. Epstein

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics; University College London - CReAM - Centre for Research and Analysis of Migration

Date Written: February 2005

Abstract

The compromise enhancing effect of lobbying on public policy has been established in two typical settings. In the first, lobbies are assumed to act as 'principals' and the setters of the policy (the candidates in a Downsian electoral competition or the elected policy maker in a citizen-candidate model of electoral competition) are conceived as 'agents'. In the second setting, the proposed policies are solely determined by the lobbies who are assumed to take the dual role of 'principals' in one stage of the public-policy game and 'agents' in its second stage. The objective of this paper is to demonstrate that in the latter setting, the compromising effect of lobbying need not exist. Our reduced-form, two-stage public-policy contest, where two interest groups compete on the approval or rejection of the policy set by a politician, is sufficient to show that the proposed and possibly implemented policy can be more extreme and less efficient than the preferred policies of the interest groups. In such situations then more than the calf (interest groups) wish to suck the cow (politician) desires to suckle thereby threatening the public well being more than the lobbying interest groups. The main result specifies the conditions that give rise to such a situation under both the perfectly and imperfectly discriminating contests.

Keywords: public-policy contests, interest groups, policy makers, lobbying, compromise

JEL Classification: D72, D6

Suggested Citation

Nitzan, Shmuel and Epstein, Gil S., Lobbying and Compromise (February 2005). CESifo Working Paper Series No. 1413. Available at SSRN: https://ssrn.com/abstract=668845

Shmuel Nitzan (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972.3.531.8930 (Phone)
+972.3.535.3180 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Gil S. Epstein

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 531 8937 (Phone)
+972 3 535 3180 (Fax)

HOME PAGE: http://faculty.biu.ac.il/~epsteig/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University College London - CReAM - Centre for Research and Analysis of Migration ( email )

Drayton House
30 Gordon Street
London, WC1H 0AX
United Kingdom

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