Reform for Sale: A Common Agency Model With Moral Hazard Frictions (Elements in Law, Economics and Politics)

Lefebvre, Perrin

ISBN 10: 1009285580 / ISBN 13: 9781009285582

Published by Cambridge University Press, 2023

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Seller Inventory # 26395937595

Bibliographic Details

• Title: Reform for Sale: A Common Agency Model With Moral Hazard Frictions (Elements in Law, Economics and Politics)
• Publisher: Cambridge University Press
• Publication Date: 2023
• Language: English
• ISBN 10: 1009285580
• ISBN 13: 9781009285582
• Binding: Soft cover
• Condition: New

About this title

Synopsis

Lobbying competition is viewed as a delegated common agency game under moral hazard. Several interest groups try to influence a policy-maker who exerts effort to increase the probability that a reform be implemented. With no restriction on the space of contribution schedules, all equilibria perfectly reflect the principals' preferences over alternatives. As a result, lobbying competition reaches efficiency. Unfortunately, such equilibria require that the policy-maker pays an interest group when the latter is hurt by the reform. When payments remain non-negative, inducing effort requires leaving a moral hazard rent to the decision maker. Contributions schedules no longer reflect the principals' preferences, and the unique equilibrium is inefficient. Free-riding across congruent groups arises and the set of groups active at equilibrium is endogenously derived. Allocative efficiency and redistribution of the aggregate surplus are linked altogether and both depend on the set of active principals, as well as on the group size.