Conventional capture models rely on the idea that regulator is induced to lenient behavior by the regulated firm through offers of monetary transfers, the bribery model, or future employment, the revolving doors model. To avoid socially costly capture, the political principal should then either...

We examine the incentives of an interest group to provide a political decision-maker with policy-relevant information and to exert pressure on her. Both activities are costly but may induce the lobby's preferred policy. Our paper provides an integrated analysis of both lobbying activities and...

In an example, monetary policy can determine the information revealed by prices, and thus it can be effective, even desirable.