Analysis on lobbying under incomplete information

This paper explores how the self-interests of a policymaker influence the lobbying process with a special interest group. We develop a formal model of the lobbying process, focusing on the role of the access fee charged by the policymaker. We generate several important results. First, we establish the existence of a perfect Bayesian equilibrium exhibiting informative lobbying in which the policymaker can increase her welfare by raising the access fee. Second, we shows that a policymaker’s self-interest combined with incomplete information about special interest groups’ policy preferences may cause the failure in policymaking process and the loss of social welfare. This supports the rules which limit the maximum amount of campaign contributions. Third, our model sheds light on the role of policymakers’ time cost in the lobbying process. We find that an increase of policymaker’s time cost results in the decrease of social welfare. This result provides the rationale for the expansion of legislative body such as increase of legislative staffs, hiring experts and possibly the foundation of new policy research institutions. The reduction in time costs resulting possibly from assistance by staffs and experts can prevent welfare loss.