Lefebvre, Perrin and Martimort, David (2023) Reform for Sale : a Common Agency Model with Moral Hazard Frictions. TSE Working Paper, n. 23-1419, Toulouse

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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.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2023
Place of Publication: Toulouse
Uncontrolled Keywords: Pluralistic Politics, Lobbying, Common Agency, Moral Hazard
JEL Classification: D72 - Economic Models of Political Processes - Rent-Seeking, Elections, Legislatures, and Voting Behavior
D82 - Asymmetric and Private Information
H10 - General
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 14 Mar 2023 12:55
Last Modified: 14 Mar 2023 12:55
OAI Identifier: oai:tse-fr.eu:127953
URI: https://publications.ut-capitole.fr/id/eprint/47021
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