## Abstract

This paper analyzes endogenous lobbying over a unidimensional policy issue. Individuals differ in policy preferences and decide either to take part in lobbying activities or not. They are assumed to be group rule-utilitarian such that they follow the rule that, if followed by everyone else in their special interest group, would maximize their group’s aggregate welfare. Once formed, lobbies make contributions to the incumbent government in exchange for a policy favor as in a common-agency model. I show the existence of equilibrium with two organized lobbies. Individuals with more extreme preferences are more likely to join lobbying activities. Therefore, the lobbyists are rather extremists than moderates. However, the competition between those extreme lobbies results in a more moderate policy outcome relative to that initially preferred by the biased government. Lobbies therefore guard against extremism, while acting as moderators of the government’s preferences.

## Acknowledgments

The author is grateful to Daron Acemoglu, Antonio Cabrales, Filipe Campante, Luis Corchón, Jacques Crémer, M. A. de Frutos, Raquel Fernández, Rebecca Morton, Ignacio Ortuño Ortn, Albert Solé-Ollé, Allard Van Der Made, Bengt-Arne Wickström, two anonymous referees and Johann Brunner, the editor, for helpful comments, suggestions and encouragement; and to Cung Truong Hoang for research assistance. The grant from Karin-Islinger-Stiftung foundation is gratefully acknowledged. The usual disclaimer applies.

## Appendix

### Proof of Proposition 1

The lobbies’ truthful contribution schedules are

The constants

Plugging eq. (4) into eq. (5) yields

where the first line is lobby

### Proof of Lemma 2

The equilibrium policy level is equal to

The first-order condition of this maximization problem amounts to

The second-order condition is satisfied and so

If lobby

The first-order condition is given by

The second-order condition is satisfied and therefore

Likewise, if lobby

The first-order condition amounts to

The second-order condition is satisfied and so

According to Proposition 1, the lobbies’ equilibrium contributions are equal to

Plugging

and

### Proof of Proposition 2

The threshold rule

Plugging in the expression for

The first derivative of eq. (6) with respect to

The first derivative (7) is strictly positive for all

Evaluating it at the critical points yields that the second-order condition holds for

For

The threshold rule

Plugging in the expression for

The first derivative of eq. (8) with respect to

The first derivative (9) is never strictly positive for all

–

–

–

The second derivative of eq. (8) is equal to

Evaluating it at the critical points yields that the second-order condition holds for

For

I find next the equilibrium threshold rules

for

for

for

for

This can be summarized as follows. For

For

### Rules Characterized by Two Thresholds

I show first that given the rules

The equilibrium policy level is equal to

The aggregate utility of anti-policy individuals from the policy outcome

Plugging in the expressions for

which is a decreasing function of

I show next that given the rules

The equilibrium policy level is equal to

The aggregate utility of pro-policy individuals from the policy outcome

Plugging in the expressions for

which is an increasing function of

### Proof of Corollary 1

The first derivatives of

These derivatives are such that

When the government is biased in favor of low policy levels, i. e.,

It follows that

Lobby

When the government is biased in favor of high policy levels,

It follows that

Lobby

When the government in unbiased,

### Government Utility in Equilibrium

The government utility in equilibrium is equal to

It is non-negative, increases in

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**Published Online:**2016-12-28

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