Special interest politics: Contribution schedules vs. Nash bargaining

The article compares two models of lobby influence on policy choice: The Grossman and Helpman (1994) contribution-schedules model and a negotiation between the lobbies and the government summarized by a Nash-bargaining function. The literature uses the models interchangeably because they imply the same equilibrium policy. We show that particular assumptions about bargaining power and disagreement utility in the Nash-bargaining solution are required for the models to lead to the same equilibrium payments and utilities. This implies that the models usually imply different sets of lobbies if lobby formation is an endogenous decision, such that the equilibrium policies also differ.