CFDP 749

Relying on the Information of Interested Parties

Author(s): 

Publication Date: May 1985

Pages: 35

Abstract: 

We investigate the conventional wisdom that competition among interested parties attempting to influence a decision maker by providing verifiable information brings out all the relevant information. We find that, if the decision maker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties, competition may be unnecessary; while if the decision maker is unsophisticated or not well informed, competition is not generally sufficient. However, if the interested parties’ interests are sufficiently opposed, or if the decision maker is seeking to advance the parties’ decision maker’s need for prior knowledge about the relevant variables and for strategic sophistication. In other settings, only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow defective decision making.

Keywords: 

Law and economics, regulation, persuasion games, revelation games, lobbying, strategic information transmission, adversary system

JEL Classification Codes:  026, 612, 613

Note: 

Published in Rand Journal of Economics (Spring 1986), 17(1): 18-32 [jstor]