No Exaggeration: Truthfulness in the Lobbying of Government Agencies by Competing Interest Groups

Abstract

Intense competition can compel lobbyists to exaggerate the benefits the government would see in tax returns and social welfare if agency officials allocate such resources to the lobbyist's members. This incentive to misrepresent grows when information asymmetry exists between lobbyists and government officials. A large body of literature has investigated how interest groups compete and interact, but it disregards the interdependency of interests between competing groups and associated strategic behaviors of other players. Our signaling model of lobbying reveals ways in which agency officials can compel lobbyists for competing interests to lobby truthfully and what the policy implications of this compulsion can be. We also present case-study evidence of how this works in practice.