Informational Lobbying under the Shadow of Political Pressure

We examine the incentives of an interest group to provide verifiable policy-relevant information to a political decision-maker and to exert political pressure on her. We show that both lobbying instruments are interdependent. In our view information provision is a risky attempt to affect the politician’s beliefs about the desirability of the lobby’s objective. The constraints governing informational lobbying determine a specific lottery available. The circumstances under which political pressure can be applied specify the lobby’s valuation of different beliefs of the politician and, thus, her attitude toward risk. The combination of lotteries available and the “shadow of political pressure” (or induced risk preference) determines the optimal lobbying behavior. We identify several factors that induce risk proclivity (and thus information provision), which allows to explain the stylized fact that lobbies engage both in information provision and political pressure. Moreover, our approach gives a novel explanation for the fact that interest groups often try to provide information credibly. We finally study the extent to which this preference for credibility is robust and identify some instances in which lobbies may prefer to strategically withhold information.