Informational Lobbying and Political Contributions

Posted: 17 May 2006

See all articles by Sven E. Feldmann

Sven E. Feldmann

Melbourne Business School

Morten Bennedsen

INSEAD - Economics and Political Sciences; University of Copenhagen - Department of Economics

Abstract

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 we 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, we analyze how competition among lobby groups as providers of information and contributions affect the choice and effectiveness of the instruments. We show that the information externality rewards the group that can abstain from information search and focus its influence on contributions.

Keywords: Lobbying, Political contributions, Asymmetric information, Common agency

JEL Classification: D72, D82

Suggested Citation

Feldmann, Sven E. and Bennedsen, Morten, Informational Lobbying and Political Contributions. Journal of Public Economics, Vol. 90, Nos. 4-5, pp. 631-656, 2006. Available at SSRN: https://ssrn.com/abstract=901759

Sven E. Feldmann (Contact Author)

Melbourne Business School ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia
+61 3 9349 8171 (Phone)
+61 3 9349 8144 (Fax)

Morten Bennedsen

INSEAD - Economics and Political Sciences ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5, Bygn 26
Copenhagen, 1353
Denmark

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