DP3611 Political Activism, Trust, and Coordination

Author(s): Marco Battaglini , Roland Bénabou

Publication Date: October 2002

Keyword(s): lobbying , interest groups , activism , political economy , signalling games

JEL(s): D72 , D78 , D82

Programme Areas: Industrial Organization , Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP3611.asp

We study political activism by several agents (lobbyists, unions, etc.) who have private but imperfect policy-relevant signals, and seek to influence the decisions of a policy maker. When agents can share information and coordinate their actions, the equilibrium is shown to be equivalent to that with a single lobbyist, and even though activism conveys valuable information, it always reduces social welfare. When interest groups act independently, two main scenarios arise. In a ‘bandwagon’ or low-trust equilibrium, agents have a high propensity to lobby even when it is unwarranted, and conversely the policy maker does not react unless all of them are actively lobbying. In a ‘mutual discipline’ or high-trust equilibrium, by contrast, each agent’s behaviour is more informative, and the policy maker’s response threshold correspondingly lower. The key difference is whether the event in which an agent can expect to be pivotal is one where others will be providing supporting evidence by their own activity (thus allowing him to be less truthful), or contrary evidence by their inactivity (thus forcing him to be more credible). We show that when the expected degree of conflict between the lobbyists and the policy maker is relatively high the unique equilibrium is of the ‘mutual discipline’ type; when ideological distance is relatively low, it is of the ‘bandwagon’ type; within some intermediate range, both equilibria coexist. We also examine the welfare implications of the different equilibria and study the optimal organization of influence activities, examining when the policy maker and the activists would prefer that the latter coordinate their actions, or act separately.