Should We Let Interest Groups Learn from Their Competitors?

Emiel Awad (London School of Economics and Political Science)

Abstract : I study a formal model where competing interest groups privately acquire and disclose verifiable information to a principal over time. The focus is on how observing lobbying behavior of competitors---transparency---affects aggregate information provision. I find that transparency may be disadvantageous because groups are dissuaded from acquiring information if they learn that competitors have disclosed favorable information for their cause. Conversely, transparency allows interest groups to be selective in acquiring information and may lead to more informed decision-making. Further, transparency causes changes in the timing of disclosure because interest groups face a trade off between scaring competitors with early disclosure and waiting to learn whether further information acquisition is necessary. The results contribute to debates over lobbying transparency in organizations such as the European Commission.

Learning in Multi-issue Bargaining

Renee Bowen (University of California, San Diego)
Ilwoo Hwang (University of Miami)
Stefan Krasa (University of Illinois, Urbana-Champaign)

Abstract : How does learning about proposer power affect agents’ ability to compromise? We study a dynamic multi-issue bargaining game between a proposer and a responder. Issues arrive at random, and with each new issue, the proposer makes a proposal, which the responder either accepts or rejects. In case of rejection, the proposer can attempt to force the issue and implement his ideal and will succeed with some probability that is a function of the proposer’s unobserved ability. Both players learn about the proposer’s ability over time as new issues arise. We show that there is conflict when the belief about the proposer is either high or low, but that compromise can occur in an intermediate region of beliefs. This is driven by both players’ incentives to avoid learning in that region. We extend the model to include the possibility of difficult issues arising in which no compromise is possible. Dif- difficult issues can disrupt a previously established compromise, forcing conflict for issues in which compromise was previously possible (easy issues). The reason conflict ensues is that the responder learns the proposer is weak and no longer has an incentive to compromise, even on easy issues.

Information, Coordination and the Legal Order

Xiaoyu Wang (Tilburg University (CentER & TILEC))
Cédric Argenton (Tilburg University (CentER & TILEC))

Abstract : This paper examines what distinguishes legal order from other forms of social orders, under what circumstances legal order applies and what the legal order can achieve. We construct models of repeated interactions where, in every period, buyers and sellers are matched pairwise. The seller has an opportunity to cut cost, and this may or may not affect the value that a buyer derives from the transaction. We find that a legal equilibrium exists if and only if the cost cutting action to be deterred is sufficiently harmful. Such an equilibrium improves welfare than an individual order equilibrium if and only if the law embodies additional information about the ex ante efficiency of the cost-cutting action. A key feature is that it economizes on costly punishment by not letting victims decide about the imposition of sanctions.