Lobbying and Compromise

Lobbying is an important part of the policy-making process in representative democracies, Grossman and Helpman (2001), Persson and Tabellini (2000). Several studies have addressed the issue to what extent lobbying affect policy? Modeling lobbying as a “menu-auction”, Grossman and Helpman (1996) study a Downsian model of electoral competition where candidates choose policies to maximize their probability of winning the elections. In their common-agency setting, lobbying induces candidates to select policies that constitute a compromise between the policy preferences of voters and the lobbies. More recently, building on the work of Besley and Coate (1997, 2001), Felli and Merlo (2001) study an alternative citizen–candidate model of electoral competition with “menu-auction” lobbying, assuming that the elected policy maker selects the lobbies that take part in the policy-making process. In their elaborate model, the equilibrium policy outcome is always a compromise between the policy preferences of the elected candidate and those of the (at most two) lobbies chosen by the policy maker. In contrast to this literature, Glazer, Gradstein and Konrad (1998) demonstrate that extreme policies may appear not in spite of, but because of, political opposition. More specifically, an incumbent may gain political support by adopting a policy the challenger is more likely to change.