Political Lobbying With Private Information

This dissertation presents original research on a game theoretic model of political lobbying. I model political lobbying as an all-pay auction with two players and private information, where each player/lobbyist submits a campaign contribution and the highest contribution wins political favor. In the first chapter I defend the use of using finite types in the lobbying game by showing that equilibrium behavior in a continuous type all-pay auction can be approximated (to any degree of accuracy) by equilibrium behavior in a finite-type all-pay auction, provided that the distributions of both games are close enough. In the second chapter I next show that introducing asymmetry between lobbyists in the private information game has unusual and counter-intuitive effects on the total campaign contributions. In particular, while the equilibrium behavior is robust to small changes in the information structure, the comparative statics of asymmetry are not. Introducing an arbitrarily small amount of private information can completely reverse the comparative statics conclusions of the complete information game. Finally in the third chapter I introduce maximum contribution limits on total campaign contributions. Contribution limits work to reverse the effects of asymmetry and change the relative probabilities of winning political favor. Since asymmetry may decrease total expected contributions, it is possible that by reversing these effects that imposing maximum contribution limits can increase total expected contributions. With complete information lobbying imposing maximum limits will increase total expected contributions if and only if lobbyists are asymmetric. With private information, however, it is possible that in expectation maximum contribution limits will not increase total expected contributions. Intuitively maximum contribution limits hurt lobbyists who are likely to donate a lot, but benefit lobbyists who normally do not contribute much. Total campaign contributions will increase only if the decrease in total contributions from the stronger lobbyist is outweighed by the increase in contributions from the weaker lobbyist.