Lobbying Game between the Government with Private Information and the Lobbyist

Abstract

This paper presents an examination of a lobbying game between a government with informational superiority and a special interest group (SIG), which is a lobbyist. This informational superiority of the government allows the application of an analytical method of ordinary contract theory in this game. Results of these analyses show that, for a SIG whose population is sufficiently small, although the government has informational superiority to the SIG, the government is unable to prevent the SIG from distorting policy excessively by endowing a political contribution to the government. However, for a SIG whose population is sufficiently large, the government’s informational superiority can stanch the SIG inducement of a larger policy by endowing a political contribution to the government. In this case, government disclosure is not always socially desirable.