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Informative Lobbying and Agenda Control
Arnaud Dellis Mandar OakUQAM University of Adelaide
Feb 2018
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Introduction
Special Interest Politics: Studying the role of Special Interest Groups(SIGs) in the political process
SIGs exert extra-electoral influence on policy-making process
Pre-electoral
Campaign contributionsEndorsementsVoter mobilization
Post-electoral
Lobbying
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Lobbying
Lobbying is the act of attempting to influence decisions made byofficials in the government, most often legislators or members ofregulatory agencies
Applicable to other contexts as well (in a university dept., which fieldto recruit in)
Lobbying firms form an important part of the landscape in politicalcapitals around the world
K Street in Washington D.C.approx. $3.35 billion spent by lobbying firms in 2017returns to lobbying can be substantial (high lobbying firmsoutperformed S&P 500 by 11%)
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Questions in the Literature
Who forms lobby groups (more generally, SIGs)
How and under what conditions lobbying affects policy outcomes
What are the welfare and distributional consequences of lobbying
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Approaches to Modeling Lobbying
Two strands in the literature
I. Lobbying as ”buying a policy”
Lobby groups offer policy contingent contributions
Can be interpreted as plain bribes or as campaign funds/endorsementsfor reelection
Lobbying distorts policies away from general interest; leads to lowerwelfare
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Approaches to Modeling Lobbying
II. Lobbying as information transmission
Lobby groups are better informed but may have divergent preferences
Lobbying provides information to the policy maker (directly/indirectly)
Cheap-talk gameSignaling game: (Differentially) costly lobbying serves as a signal aboutthe information [Lohmann, 1995]: greater lobbying expenditure onlymakes sense if the gains from the policy are sufficiently highPursuasion games
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“The currency of lobbying in the European Union is information.Information plays an important role in shaping an interest group?sorganisation and behaviour, its day-to-day activities, and even the extentto which it can affect decisions in its own favour. At root, informationdefines how interest groups interact with EU decision-makers. Groups arerelative experts on the policy issues affecting their interests most and haveaccess to considerable technical, specialist and politically salientinformation on these topics. EU decision-makers, woefully understaffedand pressed-for-time, find it helpful, if not necessary, to draw on thisinformation in order to reduce uncertainties about potential policyoutcomes. Importantly, interest groups find themselves in a good positionto take advantage of this informational asymmetry. They thus supplyinformation in exchange for legitimate access to the policy-making processwith the goal of having their voices heard at the EU level and, ultimately,steering the EU policymaking process.”— Lobbying in the EU, C. Chalmers
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Our Approach
IGs possess potentially verifiable, policy-relevant information
IGs offer to provide the relevant information to the PM (Lobbying)
Lobbying is costly
However, PM needs to spend time/resources to verify the informationprovided (Access)
Access is costly: PM cannot grant access to all lobby groups
Lobbying =⇒ Access =⇒ Information
Two sources of information:
1 Hard information: Lobbying + Access2 Soft information: Act of lobbying could acts a as signal that there is
IG-favorable information
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Model
N issues indexed i = 1, · · · ,NPolicy on issue i is
pi ∈ {0, 1}
1 (reform), 0 (status-quo)
State of the world on issue i is
θi ∈ {0, 1}Pr(θi = 1) = πi
SoW is either 1 (pro-reform) or 0 (pro-status-quo)
Policy Maker (PM)
UPM = α1 · u1(p1, θ1) + · · ·+ αN · uN(pN , θN)
u (pi , θi ) =
{1 if pi = θi0 if pi 6= θi
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Model contd.
Interest Groups (IGs)
N interest groups, one per issue
v i (pi ) =
{1 if pi = 10 if pi = 0
Interest Group i prefers policy 1 irrespective of SoW
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Four stage game
Interaction between PM and IGs modeled as follows:
1 [Lobby Formation Stage] Each IG simultaneously decides whetherto organize as lobby (at cost ci )If organized, nature reveals θi to group i
2 [Lobbying Stage] Each organized IGi simultaneously decides whetherto lobby the policy maker (at cost fi < 1)
Let `i = 1(0) denote IGi ’s action to lobby (not lobby)
3 [Access Stage] PM decides which IG(s) to grant access to;If granted access, IGi reveals θi to the policy maker
Let ai = 1(0) denote PM’s action of granting (not granting) access toIGi
4 [Policy Choice Stage] PM chooses p1, · · · , pN
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Main Innovation of the Paper
We incorporate two realistic features of the policy making process:Granting access to IGs and implementing reform are resource/timeintensive processes
Access Constraint: PM can grant access to at most K IGs
Formally, ∑ ai ≤ K
Agenda Constraint: PM can implement reform on at most M issues
Formally, ∑ pi ≤ M
Interesting case: K ≤ M ≤ N (with at least one strict inequality)
Except for these constraints, the set-up is most conducive to informationtransmission via lobbying
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Solving the Model
Solve using backward induction
(Weak) Perfect Bayesian Equilibrium
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Notation
β (beliefs), λ (lobbying strategy), γ (access stategy), ρ (policychoice)
Elements of an equilibrium
βi (a, `; θ) : PM’s posterior beliefs, Pr(θi = 1)
β = (β1, · · · , βN ) where βi ≡ βi (a, `; θ)
ρi (a, `) : policy choice rule, ρi = Pr(pi = 1)γi (`) : policy maker’s access strategy
denotes Prob that IGi is granted access
λi (θi ) : lobbying strategy
denotes Prob that IGi lobbies
β0i (`i ) : policy maker’s interim beliefs after observing lobbying actionsbut before accessEi : lobby formation decision
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This talk ...
IG formation stage not modeled
Consider the case where all N groups have formed lobbies (for alli ,Ei = 1)check robustness later
Symmetric case:
α1 = · · · = αN = αf1 = · · · = fN = fπ1 = · · · = πN = π
Status-quo is ex-ante optimal policy (π < 1/2)
Solve for a symmetric equilibrium
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No Agenda Constraint
1 ≤ K < M = NPolicy making stage
Let β = (β1, · · · , βN) denote the posterior beliefs of the policy makergiven information Iβi = Pr(θi = 1)
Consider a policy rule: ρ(β) = (ρ1(β), · · · , ρN(β))ρi denotes the probability of choosing policy 1
Lemma 1: Optimal policy rule is
ρ∗i (β) =
1 βi > 1/2[0, 1] βi = 1/20 βi < 1/2
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Access Stage
Value of information on issue i
αi · [1−max{β0i , 1− β0
i }]
Lemma 2: Optimal access strategy is grant access to issue i over j if
αi [1−max{β0i , 1− β0
i }] > αj [1−max{β0j , 1− β0
j }]
i.e. in the symmetric case (αi = αj)
max{β0i , 1− β0
i } < max{β0j , 1− β0
j }
Intuitively, PM grants access to those K groups with β0s close to 1/2
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Lobbying Stage
In symmetric equilibrium, each group lobbies with probability λ1(λ0)when θi = 1(0)
Symmetric access strategy: If I groups lobby, each group grantedaccess with equal probability γ = min{1, K
I }Denote the probability of each group lobbying by δ
δ ≡ π · λ1 + (1− π) · λ0
Γ(δ) : probability of group i being granted access upon lobbying
Γ(δ) ≡K−1∑n=0
(N − 1
n
)· δn · (1− δ)N−1−n · 1 +
N−1∑n=K
(N − 1
n
)· δn · (1− δ)N−1−n · K
n+ 1
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Characterizing Symmetric Eqm.
Policy maker’s beliefs:
βi (1, 1; θi ) : beliefs when i lobbies, and is given access ⇒ learns thetrue stateβi (1, 0; θi ) : beliefs when i lobbies but not given accessβi (0, 0; θi ) : beliefs when i does not lobby[βi (0, 1; θi ) : relevant in the case of an extension with subpoenapowers]
For simplicity let’s suppress i
Using Bayes rule
β(1, 0) =λ1 · π
δ
β(0, 0) =λ0 · (1− π)
1− δ
Policy rule can be denoted by ρ(1, 1), ρ(1, 0) and ρ(0, 0)
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Characterizing Eqm contd.
Denote each group i ’s expected payoff in state θi by EV i (θi )
EV i (1) = λ1 · [Γ(δ) · 1 + (1− Γ(δ)ρ(1, 0)− f ] + (1− λ1)ρ(0, 0)
EV i (0) = λ0 · [Γ(δ) · 0 + (1− Γ(δ)ρ(1, 0)− f ] + (1− λ0)ρ(0, 0)
Optimal lobbying strategy is given by the FOCs
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Main Results
Proposition 1:Suppose 1 ≤ K < M = N. There exists a unique equilibrium in symmetricstrategies wherein we have
1 δ∗ ∈ (0, 1)
2 λ∗1 > λ∗03 β∗(0, 0) < 1
2 ≤ β∗(1, 0)
Furthermore, the equilibrium MUST be one of two types:
Full Information Equilibrium: λ∗1 = 1, λ∗0 = 0
Overlobbying Equilibrium: λ∗1 = 1, λ∗0 ∈ (0, 1)
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Main Results contd.
Proposition 2:For a given K , the equilibrium is
1 fully informative if and only if 1− Γ(π) ≤ f < 1
2 involves overlobbying if and only if f < 1− Γ(π)
Proposition 2’:
For a given f , there exists K (f ) such that , the equilibrium is
1 fully informative if and only if K ≥ K (f )
2 involves overlobbying if and only if K < K (f )
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Intuition behind Prop. 2, 2’
Our model combines signaling and screening
lobbying signals favorable informationaccess screens the information
Lobbying and access are complements
greater access improves the value of the signal
Lobbying can be susceptible to congestion externalities
while lobbying, each group ignores the opportunity cost of accessdenied to other groups with better informationthis can lead to overlobbying
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Agenda Constraint
1 ≤ K ≤ M < NAgenda constraint could be due to time constraint or as a policy choice
Effects of agenda constraint
Negative effect: fewer policies to chooseAmbiguous effect: more/less information transmission?
Lower M reduces the payoff from lobbying: even if the state isfavorable, reform may not be implemented
However, reduced incentives to over-lobbying also solve thecongestion externalities ⇒ improves the quality of screening!
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Analysis of the Agenda Constrained Game
Characterize the symmetric equilibrium of the ”M-agenda constrainedgame”
Find conditions under which the equilibrium leads to full information,over/under-lobbying
We show that, for a given M there exist cost cut-offs f (M) and f (M)such that
f (M) < f (M)Full information equilibrium if f ∈ [f (M) , f (M))Overlobbying if f ∈ [0,f (M))Underlobbying if f ∈ [f (M), 1)
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Main Result
Consider a given f .
Proposition 3:∃M∗ ∈ {K , . . . ,N} such that the equilibrium associated with M∗ is a fullinformation equilibrium.
Proposition 4: The exists a range of parameter values for which theequilibrium of the agenda constrained game Pareto dominates theequilibrium of the unconstrained game.
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Anecdotal Evidence
A practical way to constraint M: restrict the frequency and durationparliamentary session
”HYPERACTIVITY is not a virtue in a legislature. WinstonChurchill thought Parliament should meet for no more than fivemonths a year. Texas enjoys relative freedom from red tape partlybecause its state legislature meets only every other year. If theEuropean Parliament sat only once every two years, the continent’sregulation-infested economy might well be healthier.”
(”Britain’s Lethargic Parliament”, Leaders Section, TheEconomist, April 5-11, 2014 issue)
http://www.smh.com.au/federal-politics/political-opinion/the-less-parliament-sits-the-better-off-we-all-will-be-20111119-1nohw.html
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Additional Results
Endogenous entry: We verify that equilibrium results are consistentwith the lobby formation stage
Solved the full model, with asymmetric environment, but N = 2
found qualitatively similar characterization of equilibriathe more salient the issue, lesser the extent of overlobbying
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Subpoena power: Suppose PM can mandate IGs to provideinformation, irrespecitve of whether they lobbied
Subpoena power –> PM bears the cost of gathering information
No Agenda Constraint (N = 2)
Subpoena power weakly reduces PM’s welfare
Agenda Constraint (N = 1)
Sunpoena power may improve PM’s welfare
IGs weakly better off with subpoena power (for N = 1, 2)
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Contribution of the Paper
Attempts to model both provision (lobbying) and processing (access)of information
Accounts for transactions cost, esp. in information processing
Overlobbying: even with verifiable information no full transmission ofinformation due to congestion externalities
Agenda control/constraint can improve welfare by reducingoverlobbying
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Work in Progress ...
Doing robustness check
continuos state space/ multiple reform options per issue
imperfect signals
(costly) cheap talk
pro- and anti-reform lobbies
continuous screening: quality vs quantity tradeoff
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