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How a firm can induce legislators to adopt a bad policy

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  • Matthias Dahm
  • Robert Dur
  • Amihai Glazer

Abstract

This paper shows why a majority of legislators may vote for a policy that benefits a firm but harms all legislators. The firm may induce legislators to support the policy by suggesting that it is more likely to invest in a district where voters or their representative support the policy. In equilibrium, no one vote may be decisive, so each legislator who seeks the firm’s investment votes for the policy, though all legislators would be better off if they all voted against the policy. And when votes reveal information about the district, the firm’s implicit promise or threat can be credible. Unlike influence mechanisms based on contributions or bribes, the behavior considered is time consistent and in line with the low campaign contributions by special interests. Copyright Springer Science+Business Media, LLC 2014

Suggested Citation

  • Matthias Dahm & Robert Dur & Amihai Glazer, 2014. "How a firm can induce legislators to adopt a bad policy," Public Choice, Springer, vol. 159(1), pages 63-82, April.
    • Handle: RePEc:kap:pubcho:v:159:y:2014:i:1:p:63-82
    DOI: 10.1007/s11127-012-0016-z
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    More about this item

    Keywords

    Lobbying; Voting; Special interests; Credibility;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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