NGO Strategy in Public Politics with Suspicion of Bad Science:
Inside Lobbying vs. Outside Lobbying
(Very Preliminary: Please Do Not Cite)
Mireille Chiroleu-Assouline and Thomas P. Lyony
May 25, 2014
Abstract
We study the strategies non-governmental organizations (NGOs) use to in‡uence the public political
process, emphasizing the choice between outside lobbying to in‡uence public opinion, and inside lobbying
to in‡uence regulatory decisions, when a …rm invests in order to undermine their credibility. We …nd
that NGO strategy depends upon the NGO’s ideology (whether radical or moderate), its credibility, the
ideology of the median voter, public beliefs about the issue at stake, and the trustworthiness of delegation
to an independent agency. A radical NGO cannot credibly undertake inside lobbying with a regulatory
agency, so it prefers outside lobbying and attempts to avoid delegation to an independent regulatory
agency. A moderate NGO that can credibly engage in inside lobbying prefers it to outside lobbying, and
attempts to induce the legislature to delegate to an independent regulatory agency.
Keywords: NGOs, Public Politics, Lobbying
JEL Codes: D72, D82, L31, Q58
University of Paris 1 Panthéon-Sorbonne and Paris School of Economics, Paris, France.
Email : Mireille.Chiroleu-
Assouline@univ-paris1.fr.
y Dow Chair of Sustainable Science, Technology and Commerce, University of Michigan Business School, Ann Arbor, MI,
48109. Email: tplyon@umich.edu.
1
1
Introduction
There is widespread agreement that non-governmental organizations (NGOs) play a critical role in bringing
social and environmental issues to public awareness, and mobilizing support for political action on these
issues. [Bosso 2005; Brulle 2000; Lyon 2009; Rothenberg 2002; Shaiko 1999] Yet although NGOs have long
been studied in political science and sociology, the success of this work has been mixed.1
For example,
political scientists have found remarkably little empirical evidence that NGOs have had measurable success
in shaping public policy [Rothenberg 2009]. Sociologists have focused more on the ways in which NGOs raise
public awareness and thereby help to mobilize social movements, but this too has provided little evidence
of direct impact on political outcomes. [Brulle and Jenkins 2009] Economists have long had an interest in
how interest groups in‡uence politics, [Buchanan and Tullock 1965; Stigler 1971] but only recently have they
begun developing theories that make the mechanisms of in‡uence precise. [Maxwell 2009] These models
emphasize the role of lobbying behavior and of campaign contributions. [Grossman and Helpman 2001]2
The public political strategies available to interest groups have typically been studied in isolation from
one another, but a few authors have begun to develop integrated models in which organizations can choose
between political strategies. Yu (2005) develops a model that integrates direct and indirect lobbying, with
the former modeled as a game of campaign contributions and the latter modeled as a competition to in‡uence
the beliefs of voters through the media. He shows that an increase in the e¤ectiveness of indirect lobbying
induces a substitution between the two mechanisms, and argues this may explain why environmental NGOs
specialize in indirect lobbying.
Bennedsen and Feldmann (2006) also study the choice between indirect
lobbying and campaign contributions, but they assume the politician can see whether an interest group
invested in gathering information, so a failure to lobby is informative, and hence there is a tradeo¤ between
lobbying and campaign contributions, with interest groups specializing in one or the other.
In this context,
competition between groups favors a group that can abstain from indirect lobbying and instead focus on
campaign contributions. Together, these theories might imply that industry groups that emphasize campaign
contributions might expect to have greater in‡uence than NGOs that emphasize indirect lobbying. However,
Dahm and Porteiro (2008) have a similar model to Bennedsen and Feldmann, but they assume the politican
cannot observe whether an interest group has engaged in information gathering or not, and hence they …nd
that interest groups invest in both strategies.
In this paper, we argue that the existing literature has not focused on the set of strategies that are of
greatest relevance to NGOs.
In particular, we believe campaign contributions are largely irrelevant for
NGOs, and the empirical evidence seems to bear this out. Indeed, Ansolabehere et al. (2003) argue that
individuals, not interest groups, are by far the largest source of campaign contributions, and that much of
the academic literature on campaign contributions as a driver of policy is "misguided." This appears to be
especially true for NGOs.
The website www.opensecrets.org reveals that during the 2009/2010 election
cycle, the total contributions by environmental Political Action Committees (PACs) were $1,053,584 while
1 See
the chapters by Rothenberg and by Brulle and Jenkins in Lyon (2009) for reviews of these literatures.
is also a small but growing literature on the role of NGOs in private politics, that is, direct engagement between
2 There
NGOs and corporations.
[Baron 2003; Eesley and Lenox 2006; Baron 2010; Lyon and Maxwell 2011] We leave for future
research the task of integrating the literatures on public and private political strategies.
2
those from PACs in Energy and Natural Resources came to $28,768,307. Instead of money, the main thing
that NGOs can contribute to the political arena is information. As Binderkrantz (2005: 695-696) points out,
"Two main routes are usually identi…ed for groups to achieve their political objectives: an insider strategy of
close consultation with decision makers and an outsider strategy based on public appeals through the media
and mobilization of group members and citizens."
In addition, many cases in the past showed that the credibility of green NGOs or of interest groups
opposed to the …rms’ interest (e.g. medical societies in the tobacco case) can be undermined by lobbying
campaigns secretly funded by these …rms (Oneske and Conway, 2010).
We argue that the real issue for NGOs is whether to engage in outside lobbying [Kollman 1998] or
inside lobbying [Grossman and Helpman 2001].
Thus, we build a model that complements those of Yu
(2005) and Bennedsen and Feldmann (2006), but focuses more directly on the decisions of relevance for
NGOs.
Speci…cally, we focus on a two-stage model in which the NGO can …rst attempt to persuade the
public through indirect lobbying, and then, if legislation passes and its implementation is delegated to an
independent agency, through inside lobbying.
The Firm is supposed to have two di¤erent e¤ects on this
game: by investing …rst, in order to in‡uence the median voter’s beliefs and second, to undermine the NGO’s
credibility for the agency The remainder of the paper is structured as follows. Section 2 presents the basic
model. Section 3 analyzes in detail the implementation of regulation. Section 4 analyzes indirect lobbying
that attempts to in‡uence passage of a bill. Section 5 o¤ers conclusions.
2
The Basic Model
There is an environmental issue whose severity is as yet unknown, and may turn out to have either a high
impact or a low impact.
probability one half and
Let the state of the world be denoted by ; which takes on the value
H
L
with
with probability one half. There is a possibility that legislation of stringency
p will be passed to ameliorate the losses from the environmental harm.
There are three types of actors:
the public, an NGO, and an independent regulatory agency, each of whom seeks to minimize the di¤erence
between the policy and their own ideal point. Denote a given player’s utility by
Uj =
where
j
2
j) ;
(p
is a measure of the player’s ideological position or bias. Note that a utility-maximizing policy for
a player with bias
j
is
p = +
j:
We will assume the NGO prefers a more stringent policy than does the median voter, that is,
The public is represented by a continuum of voters with utility
Ui =
(p
2
i) :
UN =
(p
2
E) :
The NGO’s payo¤ function is given by
3
E
>
M:
If no policy is implemented, the NGO’s payo¤ in state is
UE =
Its expected utility is
EUEN P =
1
(
2
L
( +
+
2
E) :
2
E)
1
(
2
H
+
2
E) :
The Firm’s objective function is
cp2 :
=
The agency’s utility is
UA =
2
A) :
(p
The game of public politics involves a series of steps that we will combine into a legislation stage and
then an implementation stage. Speci…cally, the sequence of events is
Legislation Phase
1. The NGO and the Firm can invest X to learn the state of the world.
2. The NGO and the Firm choose how much e¤ort to devote to indirect lobbying to in‡uence the public’s
beliefs about :
3. The public receives a signal z that in‡uences its beliefs about :
4. The legislature votes with the goal of maximizing the welfare of the median voter.
Implementation Phase
1. The legislature decides whether to delegate the policy decision to an independent regulatory agency.
If there is no delegation, then the legislature sets p and the game ends.
2. If the legislature delegates to the agency, then Nature chooses the agency’s ideological position.
3. If the NGO did not already invest during the legislation phase to acquire expertise, it can do it during
the implementation phase.
4. The Firm can undermine the credibility of the NGO by investing in order to increase the probability
to discover that the scientists hired by the NGO are biased.
5. The agency chooses the probability with which it will audit the NGO’s credibility.
6. The NGO can lobby the agency. (perhaps 6-4-4 instead of 4-5-6)
7. The agency makes a policy decision p and the game ends.
We solve these stages in reverse chronological order.
4
3
Implementation
Given a vote, the legislature will face a choice between delegation to a regulatory agency, or implementing
policy directly. From the …rst stage of the model, the median voter’s ideal point is
a bias that is given by
A
and the NGO have a bias given by
E:
M:
Let the agency have
If the legislature delegates to the agency,
it will attempt to use the appointment process and administrative procedures to set the agency’s ideal point
at
A
=
M.
(McCubbins, Noll and Weingast 1987) Following Bawn (1995) we assume that the legislature
cannot perfectly predict the agency’s ideal point, so that the realized ideal point is actually
where
A
=
M
+ ;
is a random variable with mean zero and variance .
At this stage, the public has already received a signal z about the state of the world. Conditional on
receiving this signal, the public’s belief about the state of the world is that the state is high with probability
qM = Pr(s = Hjz):
3.1
No Delegation
If the legislature does not delegate to the regulatory agency, the legislature itself will choose a policy p to
2
M)
min (p
p
where
is the underlying state of the world. The legislature is imperfectly informed, and seeks to
min (1
p
qM )(p
2
M)
L
qM (p
2
M) :
H
The …rst-order condition is
2(1
qM )(p
M)
L
2qM (p
M)
H
=0
(1)
or
p = (1
qM )
L
+ qM
H
+
M:
(2)
The expected utility of the median voter with no delegation ("ND") is then
ND
EUM
=
(1
qM )(qM (
=
(1
qM )(qM )(
2
L ))
H
qM )(
2
L ))
H
2
L) :
H
ND
=@qM = (2qM
that is minimized for qM = 1=2 (@EUM
3.1.1
qM ( (1
1) (
H
2
L)
ND
=@qM > 0).
and @ 2 EUM
Uninformed NGO
If the NGO has the same information as the public, the expected utility of the NGO with no delegation is
EUEN D
2
E)
=
E(p
=
(1
qM )((1
=
(1
|
qM )(qM )(
{z
qM )
L
H
Exp ected Policy Error
+ qM
2
L)
}
H
(
|
+
E
M
{z
L
2
E)
qM ((1
qM )
L
+ qM
H
+
M
H
2
E)
2
M) :
NGO Bias
}
Thus, the NGO’s utility is equal to that of the median voter except for a term re‡ecting the divergence of
the NGO’s ideological bias from that of the median voter.
5
3.1.2
NGO informed of the true state of the world
Suppose instead that the NGO knows the true state of the world. If the state is
L;
then the NGO’s utility
is
E(UEN D j
If the state is
H;
=
L)
=
((1
=
(qM (
=
2
qM
(
qM )
L)
H
+
2
L)
H
L
+ qM
H
+
M
2
E)
L
2
E)
M
+ 2qM (
L )( E
H
M)
(
2
M) :
E
then the NGO’s utility is
E(UEN D j
=
H)
=
=
( (1
=
(1
((1
qM )
qM )(
qM )2 (
L
+ qM
L)
H
M
2
E)
H
M
2
E)
2(1
qM )(
H
2
L)
+
2
L)
H
+
H
L )( E
H
M)
(
2
M) :
E
Note that
E(UEN D j
=
H)
+(1
=
=
[(1
(1
ND
E(UN
j =
qM )2 (
qM )2
2qM )(
L)
H
2
L)
2
qM
](
H
H
2
L)
=
2
qM
(
+ 2(1
2
L)
+ 2(
qM )(
+ 2(
L )( E
H
H
L )( E
H
L )( E
H
+ 2qM (
M)
L )( E
M)
+(
2
M)
E
(
E
2
M)
M)
M ):
Thus, if qM < 1=2; the NGO is more content with non-delegation if the true state is high than if it is low.
More generally, even with qM > 1=2;the NGO is more content with non-delegation if E(UEN D j
H)
E(UEN D j
=
L)
=
> 0 i.e. if
qM <
1
+
2
E
M
H
L
A radical NGO (de…ned relatively to the median voter by
M)
E
is more likely to prefer non-
delegation.
3.2
Delegation
After the indirect lobbying stage, the legislature (median voter) and the agency receive the same public
signal z that in‡uences their beliefs. After receiving the signal, both groups believe that the probability of
the high state is qM = Pr(s = Hjz): Recall that the bias of the agency is given by
A
=
M
+ ; where
is uncertain ex ante. We will assume that once delegation occurs, the bias of the agency becomes common
knowledge.
3.2.1
Uninformed Agency
If the agency is uninformed, then it maximizes
min (1
p
qM )(p
L
2
A)
6
qM (p
H
2
A) :
Given the agency’s ideal point, the …rst-order condition is
2(1
qM )(p
A)
L
2qM (p
A)
H
=0
and its policy choice is
p = (1
qM )
+ qM
L
+
H
+ :
M
Of course, the legislature is uncertain of the agency’s ideal point, so the legislature’s expectation about
2
the agency’s policy choice has a mean that is unchanged but has additional variance
.
Some algebra
shows that the median voter’s expected utility from the agency’s imperfectly informed decision is
DU nin
EUM
=
(1
qM )((1
qM ((1
Since we assume that
qM )
qM )
L
L
+ qM
H
+
+
M
+
+ qM
H
=
(1
qM )qM (
H
2
L)
E( 2 )
=
(1
qM )qM (
H
2
L)
(
2
M
2
M)
L
2
M)
H
2
+
+
)
= 0; then we have that
DU nin
ND
EUM
= EUM
2
Note that if the agency does not obtain better information than the legislature would have on its own,
delegation strictly reduces the welfare of the median voter, because it simply increases noise.
Uninformed NGO Under the assumption that the NGO has the same information as the public, the
NGO’s expected utility if an uninformed agency sets policy is
E EUEDU nin
=
(1
qM )qM (
H
2
L)
E (
=
(1
qM )qM (
H
2
L)
(
= EUEN D
M
2
E)
+
2
M)
E
2
2
NGO informed of the true state of the world Suppose instead that the NGO knows the true state
of the world. If the state is
E(UEDU nin j
E E(UEDU nin j
If the state is
H;
E(UEDU nin j
E E(UEDU nin j
L;
then the NGO’s utility is
=
L)
=
((1
=
L)
=
2
qM
(
qM )
+ qM
2
L)
H
= E(UEN D j =
L
H
+
+ 2qM (
M
+
H
L
L )( E
2
E)
M)
(
E
2
M)
2
E
2
M)
2
L)
then the NGO’s utility is
=
H)
=
((1
qM )
=
H)
=
(1
qM )2 (
= E(UEN D j =
H)
L
+ qM
H
H
+
2
L)
M
2(1
+
H
qM )(
H
2
E)
L )( E
M)
(
2
2
Thus, delegation to an uninformed agency is strictly worse in expected value than non-delegation, for both
the median voter and the NGO (whatever its information level).
7
3.2.2
Informed Agency
If the legislature delegates to the agency, and the agency is able to learn the underlying state of the world
before choosing a policy, then the agency will choose a policy p to
2
A) :
min (p
p
Thus, if the agency is informed, it simply chooses p =
2
Um =
+
M
+ : The median voter’s utility is then
; and his expected utility ex ante is
DI
EUm
=
2
:
The intuition is simple: delegating to an informed agent is desirable except to the extent that the agent’s bias
cannot be controlled. Otherwise, the agency sets the median voter’s desired policy, and is fully informed,
so delegation is bene…cial in those respects.
The NGO’s Incentive for Inside Lobbying From the NGO’s perspective, it must weigh the costs and
bene…ts of using inside lobbying to inform the agency.
If it does not engage in inside lobbying, then it
obtains the payo¤ given above for the case of delegation to an uninformed agency.
The NGO’s cost of
lobbying the agency is L, which is a continuous choice that will be determined endogenously, as explained
below. In addition, if the NGO wishes to lobby, it must invest a …xed cost X in developing expertise.
If the NGO does lobby, Grossman and Helpman (2001) point out that it is su¢ cient for the NGO to
lobby in one state of the world, and not in the other. Lobbying then serves as a costly signal that informs
the agency.
Given its bias, the NGO will choose not to lobby in the state
(2001) show that in state
H
signal, where
L:
Grossman and Helpman
there is a range of lobbying expenditures LH 2 (LH ; LH ) that will serve as a
LH
(
H
L )(2( E
M
)
(
H
L ))
LH
(
H
L )(2( E
M
)+(
H
L )):
Assuming the NGO can choose how much to lobby, it will choose the lower bound.
The informed agency will set
p= +
M
+ :
Case 1: the NGO already invested in expertise at stage 1 If the NGO invested in expertise at
stage 1, then it already knows the state at stage 2. In this case, it will prefer the lobbying equilibrium only
if
=
H
DU nin
and if its expected welfare with lobbying is higher than E EUN
:
[(
M
)2 +
2
]
qM E (LH ) >
(1
qM )qM (
2
L)
H
(
M
)2
2
which simpli…es to
(
E
M)
< (1
qM =2)(
H
L ):
Thus, for any qM , the NGO prefers the lobbying equilibrium if it is a moderate, that is, if its bias is not
too di¤erent from that of the median voter.
8
Case 2: the NGO did not acquire expertise at stage 1 If the NGO did not acquire expertise in
stage 1, then its expected value of acquiring expertise and lobbying is then
EUEDI
=
(1
qM )(
qM [(
Taking expectations over
H
+
L
+
M
+
+
M
2
E)
L
2
E)
H
+ LH ]
X:
and simplifying we have
E EUEDI =
(
E
2
M)
2
qM E (LH )
X:
If the NGO did not invest in expertise prior to indirect lobbying, will it do so at the delegation stage? It
DI
DU nin
does so if EUN
> EUN
; which is equivalent to
qM E (LH ) + X < (1
qM )qM (
2
L) ;
H
The NGO will now invest in expertise if the total expected cost of expertise and indirect lobbying is less
than (1
qM )qM (
H
2
L)
(which is error of uninformed policy).
This condition simpli…es to
X < 2qM (
H
L )f(1
qM =2)(
H
L)
(
E
M
)g:
Relative to the case where the NGO had already acquired expertise at stage 2, acquiring expertise imposes
another constraint. Not only must the NGO be a moderate, but the cost of expertise must not be too great.
If the NGO incurs the cost of expertise it must also spend the cost of lobbying, but it will then eliminate
the expected error of the policy. This assumes the agency will actually believe the NGO when it lobbies.
But remember, LH has been computed so that it will be credible to the agency! Thus, the NGO’s signal is
credible.3
3.3
When Does Delegation Occur?
From above, we see that the median voter prefers delegation to an informed agency when
DI
E EUM
2
ND
> EUM
< (1
qM )qM (
H
2
L)
Intuitively, the median voter prefers to delegate if the error from lack of control of the agency’s bias is smaller
than the error from uninformed policy.
The legislature will only delegate to the agency if it expects the agency will be able to become informed.
As noted above, this requires that the NGO be willing to incur the cost of developing expertise and of
3 Grossman
and Helpman point out that the NGO might not prefer this outcome.
It could prefer the uninformed policy
outcome, but if the agency believes they are playing a signalling equilibrium, then if the NGO fails to signal the agency will
infer that the state is
L
which is even worse for the NGO than simply getting the uninformed policy. This raises questions
about equilibrium selection which we do not really want to bother with at the moment.
9
lobbying. If the NGO already invested in expertise at stage 1, and if the agency already believes qM > 1=2
then the NGO will prefer the lobbying equilibrium if it is a moderate, that is, if
(
M)
E
< (1
qM =2)(
L ):
H
If the NGO did not acquire expertise at stage 1, then there is an additional requirement that the cost of
expertise not be too great, i.e.
X < 2qM (
L )f(1
H
qM =2)(
L)
H
(
E
M )g:
We summarize the above discussion in the following Proposition.
Proposition 1 Delegation occurs if (a) the uninformed agency believes that the most likely state of the world
is
L
(qM
X < 2qM (
1=2), (b) if expertise has not already been acquired by the NGO, then it is not too costly, i.e.
L )f(1
H
qM =2)(
L)
H
(
E
M )g;
and (c) the error due to lack of control of agency
bias is less than the policy error from uninformed policy, i.e.
4
2
< (1
qM )qM (
H
2
L) :
Legislation with Outside Lobbying
We turn now to the …rst stage of the game, where the NGO can engage in outside lobbying. We would like
to know when the NGO engages in outside lobbying, and whether it will do so even when it is uninformed.
We are also interested in whether this decision depends upon whether the NGO is a radical or a moderate.
We examine a very simple model in which the NGO simply expends e¤ort e and the Firm expends e¤ort f
to change the beliefs of the median voter and the agency, which is similar to the model used by Yu (2005). We
assume the cost function of e¤ort is the same for both players C(e) = C(f ) for e = f . We have to carefully
distinguish between the expectations of the NGO, the Firm, the agency and the median voter. The NGO
and the Firm have prior beliefs that Pr(s = H) respectively equal to qE and qF ; while the median voter and
the agency share the belief that the probability of being in state H is qM (e; f ) with qM (0; 0) = q0 such that
qF < q0 < qE . We assume @qM (e; f )=@e > 0; @qM (e; f )=@f < 0, @ 2 qM (e; f )=@e@f
2
@ qM (e; f )=@f
4.1
2
0
0, @ 2 qM (e; f )=@e2
0,
00
0 and C ( ) > 0; C ( ) > 0:
No Delegation
If delegation does not occur, then the legislature will set p = (1
qM (e; f ))
L
+ qM (e; f )
H
+
M
and the
NGO’s expected utility is
EUEN D
=
E(p
=
(1
2
E)
C(e)
qE )(qM (e; f )(
H
L)
+
M
2
E)
The …rst-order condition is
10
qE ( (1
qM (e; f ))(
H
L)
+
M
2
E)
C(e):
@EUEN D
@e
=
2(1
2q(
=
2(
@qM (e; f )
@e
@qM (e; f )
qM (e; f ))( H
C 0 (e)
L )( (1
L) + M
E)
@e
@qM (e; f )
2 @qM (e; f )
2( H
(qM (e; f ) qE )
L )( E
M)
L)
@e
@e
qE )(
H
H
L )(qM (e; f )( H
H
L)
+
E)
M
C 0 (e) = 0
or
@qM (e; f )
= C 0 (e):
@e
Thus the NGO chooses e¤ort to balance the expected bene…ts of a higher policy against the cost of
2(
e¤ort.4
L ) [( E
H
Note that if (
M)
E
M)
(qM (e; f )
< (qM (e; f )
qE ) (
qE ) (
L );
H
L )]
H
then the marginal utility of e¤ort is always
negative and the NGO does not engage in outside lobbying. We see immediately that a more radical NGO
invests more heavily in outside lobbying.
The expected pro…t of the Firm is
E
ND
=
Ep2
=
(1
=
((1
C(f )
qF )((1
qM (e; f ))
qM (e; f ))
L
+ qM (e; f )
+ qM (e; f )
L
H
H
2
M)
+
2
M)
+
qF ((1
qM (e; f ))
L
+ qM (e; f )
H
+
2
M)
C(f ):
C(f )
The …rst-order condition is
@E N D
@f
=
2 ((1
qM (e; f ))
L
+ qM (e; f )
H
=
2 ((1
qM (e; f ))
L
+ qM (e; f )
H
2 ((1
qM (e; f ))
L
+ qM (e; f )
@qM (e; f )
@qM (e; f )
L+
H
@f
@f
@qM (e; f )
+ M) ( H
C 0 (f ) = 0
L)
@f
+
+
H
C 0 (f )
M)
M) ( H
L)
@qM (e; f )
= C 0 (f ):
@f
The
@qM (e; f )
((1
@f
qM (e; f ))
L
+ qM (e; f )
H
+
?(
M)
E
M)
(qM (e; f )
qE ) (
H
L)
@qM (e; f )
@e
if the e¤orts of both NGo and Firm have symmetrical e¤ects on the median voter’s belief
@qM (e;f )
@f
qM (e; f ))
+ qM (e; f )
L
qM (e; f )(
2qM (e; f )(
4 We
=
, for the Firm to outspend the NGO, we should have
((1
2qM (e; f )(
@qM (e;f )
@e
H
L)
+2
+2
M
[
2(qM (e; f )
H
+ (1
L
E
H
H
+ qE (
L)
L)
H
+
+
H
qM (e; f ))
+
M)
[(
E
M)
(qM (e; f )
qE ) (
H
L )]
+
M
[(
E
M)
(qM (e; f )
qE ) (
H
L )]
+2
M
[
+
L]
0
+2
M
L
L
L)
L)
need to ensure that C(e) is steep enough to ensure that qH < 1:
11
E
E
+ qE (
+ (qE
H
H
L )]
+ (1
qE )
L)
, C 0 (f )
C 0 (e)
It seems likely this condition holds, which means that the Firm will actually outspend the NGO.
Proposition 2 When there is no delegation, the Firm outspends the NGO, whenever it is moderate or
radical.
Proposition 3 When there is no delegation, a radical NGO invests more in outside lobbying than does a
moderate NGO.
Denote by eU the NGO’s optimal e¤ort spent on outside lobbying when the NGO is uninformed, that is
it does not have expertise. Does the NGO prefer to invest in expertise before engaging in outside lobbying?
If it incurs the cost of expertise X, then either qE = 0 or qE = 1: Then it can tailor its e¤ort on outside
lobbying to these two states. Thus, denote by eL its e¤ort if the state is low and by eH its e¤ort if the state
is high.
If the NGO learns that qE = 0; so that the state is
EUEN D (
L)
L;
then its expected utility is
2
E)
=
E(p
=
(qM (e; f )(
C(e)
L)
H
+
2
E)
M
C(e):
The …rst-order condition is now
2(
L)
H
(
M)
E
qM (eL ; f )(
L)
H
@qM (e; f )
= C 0 (eL ):
@e
We see immediately that the NGO’s incentive to engage in outside lobbying is reduced if it learns that the
state is actually low. However, if the NGO is radical enough, i.e. if (
E
M)
> qM (eL ; f )(
H
L ),
the
NGO will continue to engage in outside lobbying to convince the public the state is high, even when it knows
the state is low. If the NGO is moderate, however, it will prefer not to engage in outside lobbying at all,
because the marginal bene…t of e¤ort is negative.
If the NGO learns that qE = 1; so that the state is
EUEN D (
H)
H
2
E)
then its expected utility is
=
E(p
C(e)
=
( (1
qM (e; f ))(
+ 1
qM (eH ; f ) (
L)
H
2
E)
+
M
C(e):
L)
@qM (e; f )
= C 0 (eH ):
@e
The …rst-order condition is now
2(
H
L)
(
M)
E
H
Now the NGO will engage in outside lobbying for certain, and will increase its investment in outside lobbying
relative to the case where it did not acquire expertise.
Whether the NGO will invest in expertise depends upon a comparison of its expected utility without
expertise
EUEN D (qE )
=
=
E(p
(1
2
E)
U
C(e)
qE )(qM (e ; f )(
H
L)
+
M
12
2
E)
qE ( (1
qM (eU ; f ))(
H
L)
+
M
2
E)
C(eU )
against the expected value of its expected utility with expertise
EUEN D (X)
=
(1
=
(1
ND
qE )EUN
(
ND
+ qEUN
(
qE )[(qM (eL ; f )(
qE [( (1
4.2
L)
L)
H
qM (eH ; f ))(
H)
+
L)
H
X
2
E)
M
+
2
E)
M
C(eL )]
C(eH )]
X:
Delegation to an Informed Agency
Now consider the case with delegation. From Proposition 1 we know the conditions under which the legislature will delegate. Importantly, it will only delegate when the NGO has incentives to lobby informatively.
In this case, the agency is informed when it actually chooses a policy. If the NGO plans to acquire expertise
after delegation, then its expected utility at stage 1 is then
E EUEDI (X)
=
(
E
2
M)
qE E (LH )
=
(
E
2
M)
qE [(
H
2
X
L )(2( E
C(e)
M)
(
H
L ))]
2
X
C(e)
Note that the NGO’s belief about the likely state of the world is qE , not qM : Thus, its expected utility does
not depend upon qM at all, and the NGO has no direct incentive to engage in outside lobbying. However,
the moderate NGO may opt to engage in outside lobbying if the legislature would not otherwise delegate.
DI
ND
Recall that the legislature will delegate if E EUM
> EUM
; which implies
2
2
L) :
< (1
qM )qM (
P E = (1
qM )qM (
H
2
L) :
2qM )(
H
2
L) :
H
De…ne policy error as
Di¤erentiating, we …nd
@P E
= (1
@qM
Note that the second derivative is negative, so policy error is maximized at qM = 1=2:
Proposition 4 Radical NGOs that cannot credibly engage in inside lobbying engage in outside lobbying.
Moderate NGOs that are willing to invest in expertise and inside lobbying will eschew outside lobbying unless
the public believes qM < 1=2 and delegation would not occur without outside lobbying.
5
Conclusions
We have constructed a simple model of an NGO’s choice between inside and outside lobbying. We selected
these two options because they seem to correspond to two of the key strategies employed by NGOs in practice.
In this regard, we di¤er from papers that study outside lobbying and campaign contributions, because we
do not feel campaign contributions are an important strategy for NGOs.
13
We …nd that the NGO’s ideological bias plays a key role in the analysis. A radical NGO cannot credibly
undertake inside lobbying with a regulatory agency, so it prefers outside lobbying and attempts to avoid
delegation to an independent regulatory agency.
A moderate NGO that can credibly engage in inside
lobbying prefers it to outside lobbying, and attempts to induce the legislature to delegate to an independent
regulatory agency.
There are many possible extensions of the basic model.
We could explore the nature of competition
between two di¤erent types of green NGO in more detail, we could allow for a brown NGO representing
industry interests. We could consider the possibility that legislation does not pass, and NGOs then have
the opportunity to engage in private politics a la Baron (2010). We could also explore the conditions under
which the NGO prefers public politics to private politics, and vice versa.
There is also a need to embed
NGO strategic choices within a model of competition between groups for membership and funding.
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