Game-theoretic Models of the Political Influence of Interest Groups

267 Pages·1998·9.04 MB·English

by  Randolph Sloof (auth.)

Game-theoretic Models of the
Political Influence of Interest Groups
Game-theoretic Models
of the Political Influence
of Interest Groups
by
RANDOLPH SLOOF
University of Amsterdam
lI....
"
SPRINGER SCIENCE+BUSINESS MEDIA, LLC
Library of Congress Cataloging-in-Publication Data
Sloof, Randolph.
Game-theoretic models of the political influence of interest groups / by
Randolph Sloof.
p. cm.
Includes bibliographical references and index.
ISBN 978-1-4419-5050-5 ISBN 978-1-4757-5307-3 (eBook)
DOI 10.1007/978-1-4757-5307-3
1. Pressure groups-Mathematical models. 2. Game theory.
I. Title
JF529.S6 1998
324' .4 '0 15193-dc21 98-26317
CIP
Copyright © 1998 by Springer Science+Business Media New York
Originally published by Kluwer Academic Publishers in 1998
Softcover reprint of the hardcover 1s t edition 1998
All rights reserved. No part of this publication may be reproduced, stored in
a retrieval system or transmitted in any form or by any means, mechanical,
photo-copying, recording, or otherwise, without the prior written permission of
the publisher, Springer Science+Business Media, LLC.
Printed on acid-free paper
CONTENTS
ACKNOWLEDGEMENTS ix
INTRODUCTION
1.1 Motivation 1
1.2 Outline of the book 4
Notes 6
References 7
2 REVIEW OF THE LITERATURE 9
2.1 The political influence of interest groups: empirical evidence 9
2.2 The political influence of interest groups: theoretical models 26
2.3 Summary 30
Notes 31
References 36
3 GAME-THEORETIC PRELIMINARIES 45
3.1 A basic signaling game 45
3.2 The three ways in which the basic signaling game will be
applied 54
3.3 Extensions of the basic signaling game 59
3.4 Summary 64
Notes 65
References 70
Vi Contents
4 CAMPAIGN CONTRIBUTIONS OR DIRECT ENDORSEMENTS? 75
4.1 Campaign expenditures, direct endorsements and voting 76
4.2 Campaign contributions and voting 79
4.3 Campaign contributions versus direct endorsements 85
4.4 Directly observable contributions 88
4.5 Concluding discussion 91
Appendix 4.A 96
Appendix 4.B 106
Notes 116
References 120
5 LOBBYING OR PRESSURE? 123
5.1 Description of the general model 124
5.2 The AL game: pressure as a means to build up reputation 131
5.3 The LA game: lobbying and the maintenance of reputation 136
5.4 The LL game: reputation building when repeated lobbying is
possible 141
5.5 Welfare comparison and institutional design 145
5.6 Concluding discussion 146
Appendix 5.A 149
Appendix 5.B 151
Appendix 5.C 168
Notes 176
References 184
6 LOBBYING POLITICIANS OR BUREAUCRATS? 187
6.1 Description of the model and its relationship to recent
delegation studies 188
6.2 Equilibrium analysis 193
6.3 Generalizations and alternative modeling assumptions 214
6.4 Concluding discussion 220
m
AW~~6A
Notes 233
References 239
Game-theoretic models of the political influence of interest groups
7 SUMMARY AND EVALUATION 241
7.1 Summary 241
7.2 Evaluation 245
Notes 251
References 252
AUTHOR INDEX 253
SUBJECT INDEX 259
ACKNOWLEDGEMENTS
This book is based on my doctoral dissertation, which I wrote during my four year
stay as a Ph.D. student at CREED, the Center for Research in Experimental
Economics and political Decisionmaking of the University of Amsterdam. In
completing this research project I have received substantial encouragement and
valuable support from a number of people and institutions. The main providers of
scientific support were certainly Frans van Winden and Jan Potters. As my
supervisor Frans performed an excellent job. He inspired my interest in interest
group behavior in the fITst place, and continued to overwhelm me with new
research questions and interesting ideas during the whole project. Both the fourth
and fifth chapter originate from our joint work. I enjoyed doing research under
Frans' supervision. As a co-author of my first two Goint) articles, on which the
Chapters 2 and 4 in this book are largely based, Jan learned me how to write
readable papers. Especially when we started writing the survey article (see Section
2.1) he must have asked himself in despair whether anything useful could come
out of it. My stubbornness in regard to how the survey should be arranged
certainly must have annoyed him from time to time. Besides his practical guidance
in writing papers, Jan's thesis appeared to be one of the main sources of
inspiration for my own work:.
Other colleagues at CREED provided scientific support as well. Isidoro
Mazza read some parts of the book and made quite a number of helpful comments.
Being my room mate Jorgen Wit made more consequential remarks than he may
realize himself. With our desks opposite to each other it was always possible to
throw some theoretical or practical (computer) problem to the other side of the
room in order to be solved immediately. Joep Sonnemans now and then provided
the reassurance I asked for when I was solving a mathematical problem. Endless
discussions with Theo Offerman always made me very angry, but may have
affected my opinion about research methodology more than I am happy to admit.
Also a number of scholars outside CREED provided useful comments on
earlier versions of the book or parts of it. Mentioning them all by name does not
fit within the limited scope of these acknowledgements. Therefore, I confme
myself to displaying my gratitude towards the members of the dissertation
committee - David Austen-Smith, Amoud Boot, Eric van Damme, Rick van der
Ploeg and Claus Weddepohl - for their valuable input.
x Acknowledgements
Besides making an inspiring research environment, my colleagues at
CREED appeared to be even more able in keeping my mind off doing research.
Joep managed to connect any casual topic that came up for discussion, typically
introduced by Theo, to an amazing story about some member of his, apparently
immense, family. Hessel Oosterbeek caused a lot of amusement by typically first
expressing to Jorgen and me his deeply felt agitation about some evil in- or
outside the university. Both Frans van Dijk and Arthur Schram convinced me that
being somewhat blunt has a very charm of its own, and is very convenient in
putting off (Ph.D.) students that badger the life out of you. Finally, Tanga
McDaniel and Mark Olson were so kind to inform me on the American way of life
during numerous mensa meals.
My parents, family and friends provided strong moral support. They
always showed a sincere interest in my personal well-being, and I have much
appreciated their kindness not to inquire too persistently after the progress and the
content of this book. Probably, in completing this book they did the most
important job by showing me that there is more than just doing research, and by
distracting my attention towards these aspects oflife. Finally, I received substantial
financial support from the Nederlandse Organisatie voor Wetenschappelijk
Onderzoek (NWO) , Shell and the Tinbergen Institute to visit conferences in often
very nice places.
Amsterdam, May 1998.
1
INTRODUCTION
In this chapter the topic of this book is introduced. Section 1.1 provides a brief
and rather general motivation for the scientific project undertaken here. Interest
groups are a very popular object of scientific inquiry, and they received already
considerable research attention from scholars in political science, as well as from
researchers in economics. Necessarily, then, this book adds to a literature which
is already quite developed. A detailed positioning in this literature of the
theoretical material presented in this monograph will be given in Chapter 2. This
second chapter will also, by means of a review of the empirical literature, provide
a more general overview of the issues deemed to be important when studying the
influence of interest groups on public policy. The outline of the entire book is
described in greater detail in Section 1.2. As most issues involved are more easily
presented in later chapters, this introductory chapter is kept brief.
1.1 MOTIVATION
Substantial political power is often attributed to interest groups. Examples abound
in both the economics and political science literature, as well as in journalistic
accounts and popular publications. On many occasions the authors express
concerns about the negative impact of interest groups on the democratic quality of
government. "The interests of a small group are served at the expense of the
interests of the general public, the taxpayers!", is an often heard popular complaint.
Apart from crippling the democratic process, it is frequently asserted that interest
groups are detrimental to society as a whole because their influence on
governmental decision-making reduces economic growth, fosters inflation, and
increases unemployment (cf. Olson, 1982). Allegedly, influence activities of
interest groups are typically directed towards the redistribution of existing wealth
("rent-seeking"), rather than to inducing policies that lead to the creation of new
wealth. The redistribution policies that result from the influence of interest groups
are distortionary, and welfare (efficiency) losses are the outcome. Moreover, the
expenditures on these influence activities are socially wasteful as well. Using a
somewhat provocative terminology, these political expenditures are part of the
"parasite economy", and do not belong to the realm of the productive economy (cf.
Rauch, 1994).