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Relational Political Contribution under Common Agency

Journal of Public Economic Theory

Published online on


Motivated by commitment problems of contracts in lobbying, this paper studies a model of a repeated common agency where monetary transfers must be voluntary. First, we show that the optimal punishment strategy for a principal takes a two‐phase scheme, which is similar to the punishment characterized by Goldlücke and Kranz. Second, we investigate whether an outcome of standard menu auctions with binding contracts can be supported by implicit contracts. We define the environment to be more preference‐diverse if an efficient decision is less attractive to each principal. We show that the discount factor must be high to support the outcome of the standard menu auction if the environment is preference‐diversified.