Pay-to-Play Politics: Informational lobbying and campaign finance reform when contributions buy access

We develop a game-theoretic model of lobbying in which contributions buy access to politicians. The analysis considers the claim that the rich are better off because they have more access to politicians, and that contribution limits reduce the rich-interest advantage, resulting in less-skewed policy. We show that these arguments do not hold when the politician is strategic in granting access. In equilibrium, rich interest groups receive greater access to the politician, but they are also the targets of politician rent seeking. Relatively poor groups tend to be better off in equilibrium. Contribution limits decrease the politician’s ability to extract rents from interest groups, which improves the payoffs of rich interests, and can result in worse policy. Finally, the paper provides a novel (and theoretically justified) argument in favor of contribution limits: they can encourage lobby formation, which results in more evidence disclosure and better policy.