Extremists into Truth-tellers: Information Aggregation Under asymmetric preferencesWorking paper, University of Lausanne (2016)
We set up a model of costly information production between two lobbies, a firm and aconsumer group, competing for influence over an imperfectly informed but benevolentgovernment. The government is endowed with a parametric amount of information andchooses the best policy from a finite, countable feasible set given the information available(its own and that forwarded by lobbies). Lobbies have asymmetric preferences, thefirm being a “high-stakes” player with relatively extreme preferences and the consumergroup a “low-stakes” player with preferences more aligned with the government’s. Weshow that lobbies spend too much on information production in any Nash equilibriumdespite a timing-game structure in which the lobbies are free to choose the order ofplay. We also show that in some parameter configurations, the firm insures against aconsumer win by forwarding unbiased information to the government, in spite of itsown extreme preferences and high stakes. The resulting informational rent enables thegovernment 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 whenthe government is imperfectly informed.
- Game theory,
- Timing games
Publication DateWinter 2016
Citation InformationJean-Philippe Bonardi, Olivier Cadot and Lionel Cottier. "Extremists into Truth-tellers: Information Aggregation Under asymmetric preferences" Working paper, University of Lausanne (2016)
Available at: http://works.bepress.com/jean_philippe_bonardi/21/