state liquor licensing implicit contracting and dry wet counties local option liquor laws are generally interpreted as granting voters the right to choose between allowing and prohibiting alcoholic beverage sales this paper argues that the real choice confronting voters is between legal sales according to state prescribed rules and illegal sales according to an informal set of locally determined rules given this choice rational voters will choose the option with the lower relative price state laws restricting the number of licenses that can be issued in legally wet jurisdictions prove to be more powerful than religious preferences in explaining the pattern of dry counties

nonlinear pricing in an oligopoly market the case of specialty coffee firms that use nonlinear pricing may distort product characteristics away from their efficient levels this paper offers the first empirical study of this issue using data from a specialty coffee market i estimate a structural utility model to compute consumers benefits from changing products sizes i then compare the estimated benefits to cost data design distortions are relatively large for products not targeted to the highest demand consumers distortions decrease toward zero with drink size for products with the largest profit margins these results support some of the central predictions from nonlinear pricing theory including no distortion at the top

do mergers increase product variety evidence from radio broadcasting mergers can reduce costs and alter incentives about how to position products so that theory alone cannot predict whether mergers will increase product variety we document the effect of mergers on variety by exploiting the natural experiment provided by the1996 telecommunications act we find that consolidation reduced station entry and increased the number of formats available relative to the number of stations we find some evidence that increased concentration increases variety absolutely based on the programming overlap of jointly owned stations we can infer that the effects operate through product crowding that is consistent with spatial preemption

simple strategy proof approximately walrasian mechanisms abstract this note provides an indirect analysis of the incentive properties of the walrasian mechanism it presents mechanisms under which truth telling is a dominant strategy in finite exchange economies in contrast to the walrasian mechanism and whose outcomes generically approximate walrasian ones for large economies these mechanisms provide new insights on the well know trade off between efficiency and incentive compatibility in finite economies journal of economic literature classification numbers d50 d71 d78

alcohol prices consumption and traffic fatalities we examine the relationships among alcohol prices consumption and traffic fatalities using data across u s states from 1982 to 2000 some previous studies have found large negative associations between alcohol taxes and fatalities however commonly used price data suggest little or no connection between alcohol prices and fatalities these apparently conflicting findings may result from measurement error and or endogeneity in the price data which biases ordinary least squares estimators toward a finding of no price effects using alcohol taxes as instrumental variables fatali ties are found to be negatively related to prices in addition alcohol consumption is strongly posi tively related to fatalities however biases may still remain because taxes are not entirely suitable as instruments

soft money and campaign finance reform we analyze special interest influence on policy when political contributions are capped but the regulation contains soft money loopholes the politician chooses between two policy options we define special interest influence as the probability the politician chooses the policy he would not have chosen in the absence of contributions any binding cap reduces special interest influence but the effect may be nonmonotonic a ban on contributions can result in greater special interest influence than a binding but nonzero cap the results may also have implications for the policy response to the 2010 supreme court ruling on citizens united v fec

patterns of political action committee contributions to the 1980 campaigns for the united states house of representatives our most robust findings can be summarized as follows u the spatial location of candidates is important in determining the pattern of campaign contributions many pacs and all pac types except agricultural cooperatives contribute in a manner highly consistent with a simple spatial model there is little giving by an individual pac to candidates at opposite ends of the dimension there is no instance of a pac contributing to incumbents located at each end of the dimension and only to challengers of incumbents in the middle or vice versa contributions against incumbents i e to challengers of incumbents are often spatial mirror images of a pac s giving in favor of incumbents though this statement must be tempered by the fact that the large majority of pacs give relatively little money to challengers few pacs give money to both challenger and incumbent in the same race giving in open seat races is if anything even more spatially consistent than in races where an incumbent is running while many individual pacs exhibit patterns of contributions consistent with the ideological dimension the data for 1980 suggest that there was no particular bias toward one end of the spectrum or the other taking all pacs together essentially eliminates the effect of the location variable in the regressions giving in races with an incumbent on the ballot was overall balanced across the dimension there are however ideological distinctions even among groups as broadly defined as the fec categories for the corporate labor and trade membership health groups the incumbent s location on the ideological dimension is an important explanatory variable even when other factors specific to the incumbent are considered of course ideology matters to nonconnected groups too they just tend to balance each other off in positive money though not in negative on average corporate and trade groups favor conservative incumbents and opponents of liberal incumbents labor pacs do the opposite except for labor pacs party is not an important variable in explaining positive contributions once the incumbent s voting record is taken into account for contributions to challengers however party is significant corporate nonconnected and trade pacs gave to opponents of democrats labor pacs did the opposite the expected closeness of the election is always an important variable both positive money and contributions to challengers increase as the probability of a strong challenge increases this suggests that pacs are sensitive to the potential impact of contributions on electoral outcomes although committee assignments have some importance in explaining campaign contributions by pac categories their net effect is never strong except in the case of cooperatives this is almost certainly because of the diversity of interests represented by pacs in every category except coops which are essentially one giant pac of milk producers we would surmise that competitive forces in the house result in most members having a portfolio of committee assignments that provides maximum advantage vis a vis each member s constituency it would therefore be surprising if overall committee assignments by themselves pointed to significant differences in generating campaign resources being chairman or ranking minority member of a committee has no impact on campaign contributions other things equal seniority as measured by number of consecutive years in office has a complicated role for positive contributions seniority has a nonmonotonic effect with contributions being higher for the most junior and most senior members ceteris paribus than for incumbents with average seniority negative contributions however are not significantly related to seniority

academic earmarks and the returns to lobbying abstract in this paper we estimate the returns to lobbying by universities to motivate our empirical work we develop a simple theoretical model of university lobbying for academic earmarks our statistical analysis shows that universities represented by a house appropriations committee hac or senate appropriations committee sac member spend less money on lobbying than those that are not represented in addition using instrumental variables estimations we show that universities without hac or sac representation may receive some benefit to lobbying for earmarks although in many estimations this benefit is not statistically different from zero however for universities with hac or sac representation a 10 percent increase in lobbying yields an additional 2 8 percent or 3 5 percent increase in earmarks respectively this suggests that there are large returns to lobbying for academic earmarks if a university is represented by a member of one the hac or sac but little or no return if not

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

a theory of the politically optimal commodity tax a theory of the politically optimal tax is developed where tax rates are endogenous and determined by forces in the political market the theory is used to explain the levels of alcoholic beverage taxes between states in the united states it is shown that these rates are influenced by the ownership structure existing in the liquor industry the consumption externalities associated with drinking the minimum drinking age laws the earmarking of tax revenues the enforcement of regulations and real income

a general equilibrium model of congressional voting in this paper we specify a model in which congressmen constituents and campaign contributors simultaneously decide on behavior constituents and contributors desire to influence the voting behavior of congressmen congressmen on the other hand want to be elected and vote accordingly we empirically test this model using roll call voting on eight bills dealing with economic regulation and find support for the model our results indicate that part of the voting behavior of congressmen may be explained by noneconomic factors we also find that unions and businesses as campaign contributors are sometimes influential unions are more often influential than is business ideological factors are also important in explaining voting

hormone beef chlorinated chicken and international trade abstract we study international trade in innovative goods subject to uncertain consumer health effects such goods are often at the center of international trade disputes we show that an interesting form of protectionism may arise because of scientific uncertainty a free riding effect is identified implying more conservative behavior by countries we also study the role of producers lobbies in providing valuable information finding that the innovative lobby has an advantage in providing information as compared with the lobby producing the traditional good moreover lobbies disclose more information when the health effects are long lasting

repeated lobbying by commercial lobbyists and special interests developing a lobbying model of repeated agency we explain previously unexplained features of the real world lobbying industry lobbying is divided between direct representation by special interests to policymakers and indirect representation where special interests employ professional intermediaries called commercial lobbyists to lobby policymakers on their behalf our analytical structure allows us to explain several trends in lobbying for example using the observation that in the united states over the last 20 years policymakers have spent an increasing amount of their time fundraising as opposed to legislating we are able to explain why the share of commercial lobbyist activity in total lobbying has risen dramatically and now constitutes over 60 of the total the key scarce resource in our analysis is policymakers time policymakers allocate this resource via implicit repeated agency contracts that are used to incent special interests and commercial lobbyists to provide a mix of financial contributions and information on policy proposals these implicit agency contracts solve both an information problem in the presence of unverifiable policy information and a contracting problem in the absence of legal enforcement these repeated relationships that are often described using the pejorative term cronyism in the popular press may in certain circumstances be welfare improving jel d72 d82 h1 p16

selection and influence interest groups and congressional voting on trade policy studies of the effects of interest groups on congressional roll call voting typically view party and ideology as competing factors and rely on a factoral model of interests or a sectoral model including only interest groups with a direct stake in the vote we depart from that strategy in several ways we define interest groups at the level of standard industrial classification two digit codes and observe the universe of interests for 1979 90 we use measures of geographically and nongeographically based economic interests to estimate the representative s party and ideology we also consider the factor endowments of individuals within a district to examine their impact on floor votes we then investigate the influence of these interests on members party affiliation and ideology as well as a pool of five floor votes on foreign trade using instrumental variables for party and ideology economic interests account for a substantial portion of the variance in all cases and models that also include other explanatory variables are highly accurate in estimating floor votes

implications for gaap from an analysis of positive research in accounting based on extant literature we review the positive theory of gaap the theory predicts that gaap s principal focus is on control performance measurement and stewardship and that verifiability and conservatism are critical features of a gaap shaped by market forces we recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally we conclude that rather than converging u s gaap with ifrs competition between the fasb and the iasb would allow gaap to better respond to market forces

information access and contributions a signaling model of lobbying interest groups pay monetary contributions 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 reports and the size of the contributions accompanying these reports the interest groups contribution decisions are plagued by a free rider problem i derive the implications of this problem for the size and pattern of contributions and for the degree of information aggregation

the demand revealing process to distribute the surplus contrary to established frequently repeated proposition that its budget surplus cannot be distributed to taxpayers without disturbing the incentive compatibility of the demand revealing process drp the surplus can be distributed by reapplying the key concept of the drp there will remain an aggregate refund error that in a bayesian sense is random with zero mean and which vanishes o 1 n 2 as the economy becomes large through replication to dela with income effects when one does not restrict the domain of the mechanism to separable utility functions i suggest a variation of the drp that preserves its incentive compatibility wgeb n is finite

how to avoid transferring a valuable asset many mechanisms such as auctions efficiently allocate an asset to the firm which values it most highly but sometimes the asset s owner may benefit from the transfer only if the asset is not too valuable to potential buyers in this setting we examine the efficiency of mechanisms when the potential buyers have private information about the asset s value we show that rent seeking and lobbying rather than merely wasting resources can lead to allocations which are close to efficient

lobbying and asymmetric information informational lobbying the use by interest groups of their alleged expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies is often regarded as an important means of influence this paper analyzes this phenomenon in a game setting on the one hand the interest group is assumed to have private information which is relevant to the policymaker whilst on the other hand the policymaker is assumed to be fully aware of the strategic incentives of the interest group to mis report or conceal its private information

campaign spending with office seeking politicians rational voters and multiple lobbies abstract i introduce a microfounded model of campaign finance with office seeking politicians a continuum of voters and a large number of heterogeneous lobbies lobbies make contributions to politicians according to a common agency framework politicians use contributions to finance their electoral expenditures voters are not fooled by electoral expenditures they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians the model is used to i determine the relation between campaign spending and the deviation from the median voter s preferred policy ii show the informational value of lobbies contributions iii evaluate the welfare implications of restricting campaign spending and iv interpret the empirical finding that campaign expenditures have a very low effect on election outcome although in equilibrium advertising provides voters with useful information under reasonable parameter values a ban on campaign contributions makes the median voter better off journal of economic literature classification numbers d72 d82 m37

a simple model of the commercial lobbying industry in this paper we present a model of the behavior of commercial lobbying firms such as the so called k street lobbyists of washington d c in contrast to classical special interest groups commercial lobbying firms represent a variety of clients and are not directly affected by policy outcomes they are hired by citizens or groups of citizens to advocate on their behalf to policymakers in our analysis we address two basic questions why do commercial lobbying firms exist and what are the implications of their existence for social welfare we answer the first part of this question by proposing that commercial lobbying firms possess a verification technology that allows them to improve the quality of information concerning the social desirability of policy proposals this gives policymakers the incentive to allocate their scarce time to lobbying firms essentially it is this access to policymakers that lobbying firms sell to their clients to address the question of social welfare we construct a simple general equilibrium model that includes commercial lobbying firms and compare the equilibrium obtained under market provision of lobbying services to the first best optimum we find that the market level of lobbying services can be socially either too large or too small and characterize when each will be the case

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

political quid pro quo agreements an experimental study we experimentally study the common wisdom that money buys political influence in the game one special interest i e a corporate firm has the opportunity to influence redistributive tax policies in her favor by transferring money to two competing candidates the success of the investment depends on whether or not the candidates are willing and able to collude on low tax policies that do not harm their relative chances in the elections in the experiment successful political influence never materializes when the firm and candidates interact just once by contrast it yields substantially lower redistribution in about 40 of societies with finitely repeated encounters however investments are not always profitable and profit sharing between the firm and candidates depends on prominent equity norms our experimental results shed new light on the complex process of buying political influence in everyday politics and help explain why only relatively few firms do actually attempt to influence policymaking

soft money and hard choices why political parties might legislate against soft money donations in contrast to the bulk of the campaign finance literature that highlights political action committee pac contributions and single donations this paper emphasizes soft money and the rationale for dual contributions employing a formal model of unregulated contributions and political access we show that donors will rationally choose to contribute to both political parties while the parties accept these dual contributions they lead to an imbalance between the benefits of contributions and the costs of providing access this race to acquire unlimited soft money leads to a situation where the parties agree to campaign finance reform legislation

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

potential contributions of political science to environmental economics while political science has much to offer at least some of its contributions might be difficult to incorporate into economic models nevertheless we argue that environmental economics might benefit from supplementing combining or sometimes even replacing the rational choice approach with other approaches commonly used in political science we develop our argument by examining three core components of political science analysis ideas power and institutions for each component we review political science approaches and propositions with a view to determining what s in it for environmental economics

a model of reputation in cheap talk building on sobel 1985 we study a dynamic game of advice where the sender s preferences are unknown to the receiver the novel feature of the model is that there is more than one type of biased sender our main result is that the more equal are the proportions of different biases in the sender population the more information can credibly be transmitted somewhat surprisingly however we also find that the receiver does not benefit from this equality we discuss our results in the context of political lobbying and show that institutions that increase transparency lower lobbyists incentives for truthtelling but unambiguously promote the policymaker s welfare

campaign contributions and access an important and pervasive view of campaign contributions is that they are given to promote access to successful candidates under circumstances when such access would not ordinarily be given in this story access is valuable as it offers groups the opportunity to influence legislative decisions through the provision of policy relevant information under complete information regarding donors policy preferences i argue that this model predicts a negative relationship between contributions and the extent to which the groups and the recipient legislators preferences are similar however one of the more robust empirical findings in the literature is that this relationship is positive relaxing the informational assumption on donors preferences i reexamine the access story with a model in which campaign contributions can act as signals of policy preference and the informational value of access to any agent is endogenous

campaign contributions as investments the u s house of representatives 1980 1986 this paper treats the market for special interest campaign contributions and political favors as a simple asset market the model yields a simple equilibrium relationship among three variables the total amount of investor contributions a candidate receives the monetary value of the favors he has promised and his probability of winning using data on open seat races for the u s house of representatives i confront the model with a series of tests despite the starkness of the model the results of these tests are highly supportive

estimation of a model of entry in the airline industry this paper considers the effect of an airline s scale of operation at an airport on the profitability of routes flown out of that airport the empirical methodology uses the entry decisions of airlines as indicators of underlying profitability the results extend the empirical literature on airport presence by providing a new set of estimates of the determinants of city pair profitability these estimates imply that city pair profits increase in airport presence and decrease rapidly in the number of entering firms the literature on empirical models of oligopoly entry is also extended via a focus on the role of differences between firms

an empirical model of firm entry with endogenous product type choices i describe a model of entry with endogenous product type choices these choices are formalized as the outcomes of a game of incomplete information in which rivals differentiated products have nonuniform competitive effects on profits i estimate the model for location choices in the video retail industry using a nested fixed point algorithm solution the results imply significant returns to product differentiation simulations illustrate the tradeoff between demand and intensified competition and the extent to which markets with more scope for differentiation support greater entry

efficient voting with penalties abstract simple majority does not reflect the intensity of voters preferences this paper presents an efficient collective choice mechanism with two alternatives when the designer may use non transferable punishments to persuade agents to reveal their private information the designer faces a dilemma a punishment may induce a more correct choice but its cost is socially wasteful the efficient mechanism is a weighted majority weight of each individual is known ex ante and no punishments are applied if preferences are relatively homogeneous eliciting types through punishments in order to construct type specific weights should occur if preference intensity is relatively heterogeneous

the implications of unverifiable fair value accounting evidence from the political economy of goodwill accounting abstract i study the evolution of sfas 142 which uses unverifiable fair value estimates to account for acquired goodwill i find evidence consistent with the fasb issuing sfas 142 in response to political pressure over its proposal to abolish pooling accounting the result is interesting given this proposal was due in part to sec concerns over pooling misuse i also find evidence consistent with lobbying support for sfas 142 increasing in firms discretion under the standard agency theory predicts such unverifiable discretion can be used opportunistically

public monopoly and economic efficiency evidence from the pennsylvania liquor control board s entry decisions we estimate a spatial model of liquor demand to analyze the impact of government controlled retailing on entry patterns in the absence of the pennsylvania liquor control board the state would have roughly 2 5 times the current number of stores higher consumer surplus and lower payments to liquor store employees with just over half the number of stores that would maximize welfare the government system is instead best rationalized as profit maximization with profit sharing government operation mitigates but does not eliminate free entry s bias against rural consumers we find only limited evidence of political influence on entry jel d42 d72 l11 l12 l43 l81

congressional voting on labor issues the role of pacs this study measures the impact of labor and corporate political action committee pac contributions on the voting of members of the house of representatives on labor issues during 1979 80 it also analyzes the allocation of labor pac contributions among house candidates pac contributions were found to have a significant direct effect on roll call voting even controlling for the representative s political party and characteristics of the constituency since pac money also affects roll call voting indirectly by influencing which party wins elections the overall impact of pac money on congressional voting is probably substantial the author also finds that labor pacs have focused more on influencing the outcome of elections than on currying favor with powerful members of the house who are likely to be re elected anyway

pay to play politics informational lobbying and contribution limits when money buys access abstract we develop a game theoretic model of informational lobbying between two interest groups and a politician in which the politician can require political contributions in exchange for access the analysis considers three claims 1 the rich have better access to politicians than less wealthy groups 2 this access advantage makes the rich better off and skews policy in their favor and 3 contribution limits can reduce the rich group advantage and result in less skewed policy we show that the rich do have better access with the politician always offering access to the rich groups and only sometimes offering access to the less wealthy group this does not however mean that the rich group is better off or that policy is biased in its favor the politician sets access fees to extract the greatest amount of rent from the political process when only the rich group has access its expected benefit from gaining access is fully offset by its payment to the politician in this case the less wealthy interest group who is not targeted by the politician is better off contribution limits decrease the politician s ability to extract rent which improves the payoffs of rich interests and decreases politician payoffs finally the paper presents a novel benefit of contribution limits they can encourage the formation of lobby groups or the search for evidence which results in more evidence disclosure and better policy

votes or money theory and evidence from the us congress abstract this paper investigates the relationship between the size of interest groups in terms of voter representation and the interest group s campaign contributions to politicians we uncover a robust hump shaped relationship between the voting share of an interest group and its contributions to a legislator this pattern is rationalized in a simultaneous bilateral bargaining model where the larger size of an interest group affects the amount of surplus to be split with the politician thereby increasing contributions but is also correlated with the strength of direct voter support the group can offer instead of monetary funds thereby decreasing contributions the model yields simple structural equations that we estimate at the district level employing data on individual and pac donations and local employment by sector this procedure yields estimates of electoral uncertainty and politicians effectiveness as perceived by the interest groups our approach also implicitly delivers a novel method for estimating the impact of campaign spending on election outcomes we find that an additional vote costs a politician on average 145

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

are campaign contributions a form of speech evidence from recent us house elections this paper investigates the effects of the sources ofcandidates campaign funding on their electoral outcomes withparticular emphasis on whether candidates who rely on a narrowbase of funding suffer adverse electoral consequences anextensive dataset consisting of over 650 000 contributions tohouse candidates in elections from 1980 to 1992 is used theresults reveal a negative relationship between theconcentration of contributions and voteshare for open seatcandidates and challengers this finding appears to havesignificant implications for some of the empirical premisesunderlying the u s supreme court s landmark buckley v valeo decision at the very least it represents an importantstylized fact about us elections that is robust over 1980 1992 period

if you cannot get your friends elected lobby your enemies we incorporate campaign contributions in the citizen candidate model of representative democracy with endogenous lobbying of felli and merlo 2006 in equilibrium lobbies contribute to the electoral campaign of candidates whose policy preferences are aligned with their own in the event that their preferred candidate does not win the election lobbies also transfer resources to elected politicians with opposed preferences to induce policy compromise on the other hand lobbies never make post electoral transfers to winning candidates whose electoral campaign they supported

when the squeakiest wheel gets the most oil exploiting one s nuisance power abstract in this paper a lobby group or union may influence public policy because it is able via a costly signal such as a boycott or a strike to negatively impact the image of decision makers the competence of a government is measured by its ability to do a lot with only a little money voters receive through observing the level of public output only a noisy signal of government s quality so that the lobby groups which are better informed may transmit to them more precise information about it we show that when unions are unbiased i e have no hostility against or sympathy for the incumbent government strikes may occur only when the government is bad consequently a strike in this case acts as a clear though costly signal to the public of an incompetent government when some or all unions or lobby groups are biased against the incumbent government we show that the possibility of strikes may distort the budget allocation away from the efficient one bad governments have a tendency to favor their political enemies while good governments favor their political enemies only when they are not overly biased

politician preferences law abiding lobbyists and caps on political contributions the effect of a contribution cap is analyzed in a political lobbying game where the politician has a policy preference in contrast to the previous literature without politician policy preferences more restrictive binding caps always reduce expected aggregate contributions however the initial imposition of a cap increases contributions if the politician mildly favors the low valuation lobbyist s policy the introduction of policy preferences permits analysis of monied interests policy influence a more restrictive cap makes it more likely that the politician enacts the policy he would have enacted in the absence of lobbying even in cases where expected aggregate contributions increase

is trade policy for sale congressional voting on recent trade bills this paper examines voting by u s representatives onthe north american free trade agreement the uruguayround agreement and most favored nation status forchina using recent political economy models of tradepolicy to formulate an empirical specification ofcongressional voting behavior we find evidence thatcampaign contributions influenced legislators voteson the nafta and uruguay round bills labor groupcontributions were associated with votes against freertrade while business contributions were associatedwith votes in favor of freer trade economicconditions in each member s district as well as thebroad policy views of the legislators also affectedrepresentatives voting decisions

informational lobbying and political contributions 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

asymptotic efficiency of the demand revealing mechanism abstract it is shown that the demand revealing mechanism creates only a negligibly small undesired deficit when the number of participants in the decision group in question is sufficiently large since the size of deficit is a measure of inefficiency and since the former is inevitable the states result demonstrates the approximate optimality of the mechanism

economic actors lobbying influence on the prospects for war and peace political scientists and economists have long been interested in the role of special interests in the policymaking process in the past few years a series of important new books have argued forcefully that the lobbying activities of economic actors have an important influence on the prospects for war and peace all of these analyses claim that whether economic actors enhance or decrease the likelihood of conflict ultimately depends on the domestic political balance between economic actors who have a strong vested interest in pushing for peace versus those that do not i advance two contrary arguments at least among the advanced states i posit there are no longer any economic actors who will be favorable toward war and who will lobby the government with this preference all of the identified mechanisms that previously contributed to such lobbying in these states have been swept away with the end of colonialism and the rise of economic globalization in particular i show that the current structure of the global economy now makes it feasible for foreign direct investment to serve as an effective substitute for conquest in a way that was not possible in previous eras my second argument concerns those economic actors in advanced states with a preference for peace i posit that it has become unnecessary for them to directly lobby the government to avoid war on economic grounds because economic globalization the accumulation of decisions by economic actors throughout the globe now has sufficiently clear economic incentives for leaders

resistance redistribution and investor friendliness abstract poor communities sometimes resist private investment and destroy economic surplus even if the government has the willingness and ability to redistribute we interpret such acts of resistance as demands for redistribution destruction contains credible information about how the affected group values surplus and such information is used by the government in implementing the optimal redistribution policy the extent of destruction is increasing in the extent of political marginalization of the affected group resistance not only destroys economic surplus it also mutes the investor s incentives to create surplus the government uses a tax subsidy on the investor to maximize weighted social surplus and we show that the possibility of destruction may force the government to be too soft in its negotiations with the investor we discuss several policy instruments that have the potential to improve welfare these include compensation floor for the affected group legal or financial protection for the investor and licensing fees for the investor

information transmission and inefficient lobbying abstract in a seminal paper grossman and helpman 1994 introduced a framework to understand how lobbying influences the choice of import export tariffs in this paper we extend their analysis and assume that lobbies have private information to analyze the effects of information transmission in a grossman and helpman lobby game information transmission leads to two agency costs one refers to the cost of signaling and the other to the cost of screening the lobby s competitiveness the signaling cost reduces distortions resulting from the screening cost on the other hand distortions from the screening cost enhance the signaling cost the two combined effects generate more distortions in the political game than each effect separately tariff protection and lobbies rents are lower than those found in grossman and helpman s truthful equilibrium therefore information transmission may improve welfare through the reduction of rent seeking activities

is it whom you know or what you know an empirical assessment of the lobbying process abstract do lobbyists provide issue specific information to members of congress or do they provide special interests access to politicians we present evidence to assess the role of issue expertis

corporate political donations influences from directors networks motivated by contemporary debates concerning whether directors inappropriately deploy corporate funds for corporate political donations and the limited research into managerial influence on corporate political donations we examine the impact of director influences from a network perspective using a sample of large listed australian corporations and their political party donation activity during 2000 2007 we find that both the professional and non professional networks of directors influence corporate political donations we observe these influences in relation to donations at the federal and state levels and with respect to the choice of recipient political parties

show them your teeth first a game theoretic analysis of lobbying and presure this paper investigates the choice of an interestgroup between lobbying words and pressure actions in order to influence a policymaker both lobbying and pressure are modeled asstrategic means of transmitting information that isrelevant to the policymaker however only pressure isdirectly costly to the policymaker the interactionbetween the interest group and the policymaker isframed as a repeated signaling game in equilibriumpressure in contrast to lobbying only occurswhen the interest group s reputation is sufficientlylow and always improves its reputation it is shownthat repeated lobbying cannot completely substitutefor pressure and that the interest group may beforced to sustain its reputation through lobbying weconclude that pressure is typically used to build upa reputation lobbying to maintain a reputation

campaign advertising and voter welfare this paper investigates the role of campaign advertising and the opportunity of legal restrictions on it an electoral race is modeled as a signalling game with three classes of players many voters two candidates and one interest group the group has non verifiable insider information on the candidates quality and on the basis of this information offers a contribution to each candidate in exchange for a favorable policy position candidates spend the contributions they receive on non directly informative advertising this paper shows that 1 a separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive 2 although voters are fully rational a ban on campaign advertising can be welfare improving and 3 split contributions may arise in equilibrium and if they arise too often they are detrimental to voters

dynamic legislative decision making when interest groups control the agenda we consider dynamic decision making in a legislature in which in each period legislators vote between the status quo previous period s policy and a new bill however the agenda formation process is captured by interest groups that is the new bill on the agenda is determined by an all pay auction among these groups we show that convergence to the median voter of the legislature arises if interest groups are patient enough but not necessarily otherwise we characterize the bound on the speed of convergence in a family of stationary equilibria in which policy bounces between right wing and left wing policies we also show that convergence may be faster if organized interest groups represent only one side of the policy space e g when only business and not consumer interests are organized

the politics of government financial management evidence from state bonds abstract in the 3 7 trillion u s state and local government bond market greater issuance costs lower issue prices and greater underwriting fees benefit financial institutions while costing taxpayers campaign contributions by politically supportive underwriters can be associated with lower issuance costs alternatively contributions can influence a politician to accept greater costs this paper s evidence suggests that contributions influence politicians in the absence of an underwriter auction underpricing increases with the chosen underwriter s contributions relative to others moreover the difference in the fees charged by contributing underwriters and those charged by non contributing underwriters is 2 9 in the presence of an underwriter auction these results are statistically insignificant

an econometric model of location and pricing in the gasoline market abstract the authors propose an econometric model of both the geographic locations of gasoline retailers in singapore and price competition among retailers conditional on their geographic locations although market demand for gasoline is not observed the authors are able to infer the effects of such demand from stations locations and pricing decisions using available data on local market level demographics using the proposed location model which is based on the assumption of social welfare maximization by a policy planner the authors find that local potential gasoline demand depends positively on the local demographic characteristics of the neighborhood using the proposed pricing model which is based on the assumption of bertrand competition between retail chains the authors find that retail margins for gasoline are approximately 21 the authors also find that consumers are willing to travel up to a mile for a savings of 03 per liter using the estimates of the proposed econometric model the a

on existence of location equilibria in the 3 firm hotelling problem it is well known that the hotelling model of spatial competition with three firms admits no equilibrium solution see chamberlin 1933 and lerner and singer 1937 apparently this non existence result is associated with the assumption that customers patronize the nearest firm now empirical evidence supports the idea that consumers do not necessarily choose to buy from the closest firm since they also take variables other than distance into account as these variables are often unobservable firms cease to be fully informed about consumers motivations consequently they can at best determine the shopping behavior of a particular customer up to a probability distribution the purpose of this note is to reconsider the 3 firm hotelling problem within a probabilistic framework it is shown that two different types of equilibria emerge centrally agglomerated equilibria in which the three firms are clustered and symmetric dispersed equilibria in which the three firms have distinct locations these equilibria are compared to the socially optimal locations

preemption contests between groups we consider a preemption game between competing groups firms lobbying individually for their groups interests provide an empirical example among symmetric groups the first firm to take action bears an unobserved cost and wins the prize on behalf of its group in equilibrium the firm with the lowest cost takes action but with delay more competition and a smaller ratio of costs to benefits reduce delay firms in larger groups wait longer but group action can occur earlier as the probability of a low cost firm is higher asymmetries in group size or strength of externalities also matter

should we tax or cap political contributions a lobbying model with policy favors and access abstract this paper develops a model of political contributions in which a politician can either sell policy favors or sell access access allows interest groups to share hard information with the politician in support of their preferred policy here selling access maximizes policy utility while selling policy favors maximizes total contributions imposing a binding contribution limit makes it more likely that the politician sells access which can improve expected constituent welfare however a contribution limit distorts the signals associated with the contributions which tends to result in worse policy alternatively a tax on political contributions can ensure that the politician sells access without distorting his information therefore from the viewpoint of a representative constituent a tax on contributions is strictly preferred to a contribution limit or no reform the politician however may prefer regulation in the form of a contribution limit even when a tax is better for the constituent

who lobbies whom special interest politics under alternative electoral systems why do some interest groups lobby politicians and others lobby bureaucrats we theorize lobbying venue choices and intensityasafunctionofcontractenforceabilitywithpolicymakers politicians orbureaucrats wearguethatorganizational structures of interest groups in particular whether they are centralized or decentralized substantially affect their lobbying strategies because they are associated with different ability to monitor and enforce contracts with policy makers and punish them when they fail we further demonstrate that the effect of centralized versus decentralized structure on venue choices is conditional on the types of electoral system majoritarian semiproportional single nontransferable vote sntv or proportional representation systems we test this argument using longitudinal survey data on lobbying which span two decades and cover around 250 interest groups in various sectors and issue areas in japan the results lend strong support to our argument about contract enforceability under alternative electoral systems

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero

trust coordination and the industrial organization of political activism we study political activism by several interest groups with private signals when their ideological distance to the policymaker is small a low trust regime prevails agents frequently lobby even when it is unwarranted taking advantage of the cone rmation provided by others activism conversely the policymaker responds only to generalized pressure when ideological distance is large a high trust regime prevails lobbying behavior is disciplined by the potential contradiction from abstainers and the policymaker s response threshold is correspondingly lower within some intermediate range both equilibria coexist we then study the optimal organization of ine uence activities contrasting welfare levels when interest groups act independently and when they coordinate jel d72 d78 d82

the demand for alcohol the differential response to price although several studies indicate that drinking is responsive to price little work has focused on whether prices have a differential effect on light moderate or heavy drinking this study examines the price responsiveness of the demand for alcohol whether heavy drinkers are less sensitive to price than light or moderate drinkers the study uses data on alcohol consumption on the 1983 national health interview survey the results indicate that both light and heavy drinkers are much less price elastic than moderate drinkers further we cannot reject the hypothesis that the very heaviest drinkers have perfectly price inelastic demands

service induced campaign contributions and the electoral equilibrium candidates for office are modeled as promising services such as support for legislation and intervention in the bureaucracy to interest groups in exchange for campaign contributions an electoral equilibrium is characterized in which candidates choose service contribution offers and interest groups choose whether to contribute the model provides several explanations of congressional incumbents success in over 90 percent of their reelection contests a recognition advantage a high personal valuation of the office a lower cost of providing services and policy alignment with high demand interest groups the model yields predictions that are consistent with empirical findings on the relation between campaign contributions and election outcomes