Citation

Discussion Paper Details

Please find the details for DP11118 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Extremists into Truth-tellers: Information Aggregation under Asymmetric Preferences

Author(s): Jean-Philippe Bonardi, Olivier Cadot and Lionel Cottier

Publication Date: February 2016

Keyword(s): Game theory, imperfect information, lobbying model and timing game

Programme Area(s): Public Economics

Abstract: We set up a model of costly information production between two lobbies, a firm and a consumer group, competing for influence over an imperfectly informed but benevolent government. The government is endowed with a parametric amount of information and chooses the best policy from a finite, countable feasible set given the information available (its own and that forwarded by lobbies). Lobbies have asymmetric preferences, the firm being a high-stakes player with relatively extreme preferences and the consumer group a low-stakes player with preferences more aligned with the government's. We show that lobbies spend too much on information production in any Nash equilibrium despite a timing-game structure in which the lobbies are free to choose the order of play. We also show that in some parameter configurations, the firm insures against a consumer win by forwarding unbiased information to the government, in spite of its own extreme preferences and high stakes. The resulting informational rent enables the government to adopt moderate policies aligned with its own (i.e. societal) preferences, suggesting a new way in which lobby competition can produce good policies even when the government is imperfectly informed.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11118

Bibliographic Reference

Bonardi, J, Cadot, O and Cottier, L. 2016. 'Extremists into Truth-tellers: Information Aggregation under Asymmetric Preferences'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11118