Information, Access and Contributions: A Signaling Model of Lobbying

By Sunil Lohmann
1993| Working Paper No. 1260

This paper develops a signaling model of competitive lobbying. Interest groups pay a monetary contribution to gain access and provide information to a policymaker. If their interests are aligned with those of the policymaker’s constituency, they have costless access and report their private information truthfully. If their interests conflict, they are forced to pay a strictly positive contribution in order to enhance the credibility of their reports. The policymaker bases her policy decision on the competing groups’ reports and the size of the contributions that accompany their reports. The monetary payments made by the interest groups can be thought of as voluntary and costly contributions to a public good: information. Their contribution decisions are plagued by the standard free rider problem. Each group’s incentives to contribute are determined by the marginal effect of its contribution on the policymaker’s decision. As a consequence, the size of its contribution is small relative to the benefits it expects to derive from the policymaker’s decision. Perhaps surprisingly, the information dispersed among the interest groups is fully revealed in equilibrium despite the free rider problem.