Lobbying competition is viewed as a delegated common agency game under moral hazard. Several interest groups try to inﬂuence a policy-maker who exerts eﬀort to increase the probability that a reform be implemented. With no restriction on the space of contribution schedules, all equilibria perfectly reﬂect the principals’ preferences over alternatives. As a result, lobbying competition reaches eﬃciency. Unfortunately, such equilibria require that the policy-maker pays an interest group when the latter is hurt by the reform. When payments remain non-negative, inducing eﬀort requires leaving a moral hazard rent to the decision-maker. Contributions schedules no longer reﬂect the principals preferences, and the unique equilibrium is ineﬃcient. Free-riding across congruent groups arises and the set of groups active at equilibrium is endogenously derived. Allocative eﬃciency and redistribution of the aggregate surplus are linked altogether and both depend on the set of active principals, as well as on the groups size.
Pluralistic Politics; Lobbying; Common Agency; Moral Hazard;
- D72: Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D82: Asymmetric and Private Information • Mechanism Design
- H10: General
Perrin Lefebvre, and David Martimort, “Reform for Sale: a Common Agency Model with Moral Hazard Frictions”, TSE Working Paper, n. 23-1419, March 2023.
TSE Working Paper, n. 23-1419, March 2023