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Grossman Helpman (2001) - Special Interest Politics Chapters 4 And 5 (view source)
Revision as of 19:05, 26 April 2010
, 19:05, 26 April 2010no edit summary
==Reference(s)==
Grossman, Gene and Elhanan Helpman (2001), "Special Interest Politics", Chapters 4 and 5, MIT Press [http://www.edegan.com/pdfs/Grossman%20Helpman%20(2001)%20-%20Special%20Interest%20Politics%20Chapters%204%20And%205.pdf pdf]
These chapters reference:
*Crawford, Vincent P. and Joel Sobel (1982), "Strategic Information Transmission", Econometrica, Vol. 50, No. 6 (Nov.), pp. 1431-1451 [http://www.edegan.com/pdfs/Crawford%20Sobel%20(1982)%20-%20Strategic%20Information%20Transmission.pdf pdf]
==Abstract==
===One Lobby - Three States===
Again there is no incentive for the SIG to misreport <math>\theta_H\,</math> when it is the true state. When <math>\theta_M\,</math> is the true state we can perform the bias restriction calculation as before to get:
:<math>\delta le \frac{\theta_H-\theta_M}{2}\,</math>
If we were just distinguishing between all three states this would hold for <math>\theta_L\,</math> too:
:<math>\delta le \frac{\theta_M-\theta_L}{2}\,</math>
However, the SIG now has the option of reporting <math>\theta_L\,</math> or not <math>\theta_L\,</math>, in the latter case expecting the policy maker to implement <math>\frac{(\theta_H-\theta_M)}{2}. In this case of partial information transmission we have to recalculate the bias restriction for when the real state of the world is <math>\theta_L\,</math> (For <math>\theta_M\,</math> the bias restriction is less binding). Here the SIG's ideal point is <math>\theta_L+\delta\,</math> so the SIG will not report falsely iff:
:<math>(\theta_L+\delta) - \theta_L \ge \frac{(\theta_H + \theta_M)}{2} - (\theta_L + \delta)\,</math>
:<math>\therefore \delta \le (\frac{\theta_H - \theta_M}{4} + {\theta_M - \theta_L}{2}\,</math>
This allows for an equilibrium with partial transmission of information - this can be possible when the bias conditions for full transmission are violated.
:<math>\,</math>
