Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 109: A welfare analysis of strategic information revelation

Johan Lagerlöf
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Johan Lagerlöf: Department of Economics, Postal: Stockholm School of Economics, Box 6501, S-113 83 Stockholm, Sweden.

Abstract: In this paper a persuasion game is analyzed, where "persuasion" is understood as an interested party's acquisition and transmission of information to a decision maker. The model allows for many interpretations, e.g., political lobbying or influence activities in organizations. Individuals' ex ante welfare levels in the equilibria of this model are compared to those in a benchmark model where information acquisition (and hence persuasion) is not possible. It is found that the decision maker is always better off with his choice whether to acquire information is unobservable. Moreover, we study the welfare effects for a third party with preferences aligned to those of the decision maker. This third party has himself not the opportunity to persuade.

Keywords: Information transmission; persuasion; interest groups; lobbying competition; federalism

JEL-codes: D72; D82

37 pages, March 1996

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