| Abstract: |
The compromise enhancing effect of lobbying on public policy has been
established in two typical settings. In the first, lobbies are assumed to act
as 'principals' and the setters of the policy (the candidates in a Downsian
electoral competition or the elected policy maker in a citizen- candidate
model of electoral competition) are conceived as 'agents'. In the second
setting, the proposed policies are solely determined by the lobbies who are
assumed to take the dual role of 'principals' in one stage of the
public-policy game and 'agents' in its second stage. The objective of this
paper is to demonstrate that in the latter setting, the compromising effect of
lobbying need not exist. Our reduced-form, two-stage public-policy contest,
where two interest groups compete on the approval or rejection of the policy
set by a politician, is sufficient to show that the proposed and possibly
implemented policy can be more extreme and less efficient than the preferred
policies of the interest groups. In such situations then more than the calf
(interest groups) wish to suck the cow (politician) desires to suckle thereby
threatening the public well being more than the lobbying interest groups. The
main result specifies the conditions that give rise to such a situation under
both the perfectly and imperfectly discriminating contests. |