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Seminario Académico CEA-MIPP - MIERCOLES 15 DE JUNIO,12:00 HRS - SALA CONSEJO (401) P/4 BP - Daniel Habermacher (U Andes Chile)

Policy-advising competition and endogenous lobbies


PresentaDaniel Habermacher (U Andes Chile)



We investigate competition between experts with different motives. A policy-maker has to implement a policy and can either acquire information herself or hire a biased but well-informed expert. We show that the policy-maker delegates the decision to the expert if the latter cares sufficiently about the policy. In particular, the expert acts as an advisor (positive price) if her bias is small and as a lobbyist (negative price) otherwise. We then introduce an unbiased expert who cares about her reputation. We show that competition may force the biased expert to turn lobbyist. Finally, the effect of competition on social welfare depends on whether the policy is more important for society than for the policy-maker. In particular, if society deems the policy not important, welfare improvements from hiring the unbiased expert may arise when her expertise is low.

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