The Art of Pitching: A Theory of Lobbying in Procurement

ABSTRACT We study lobbying as a seller's ploy to affect the buyer's learning process about the value of a singular good he wishes to procure. We argue that a lobbying seller strategically distorts “soft” rather than private information, and model this as the seller “jamming” the buyer's signal—not merely by shifting its mean, but also by skewing (increasing the third moment of) its distribution. An unobserved increase in lobbying effort always expands demand; thus, unless it is too costly, the seller lobbies regardless of how suspicious the buyer is. Crucially, even when correctly anticipated in equilibrium, lobbying rotates the buyer's demand in a way that lowers the equilibrium price and increases efficiency. In our skew‐normal learning model, the seller gains (gross of the cost of her lobbying effort) and the buyer loses from lobbying in equilibrium; nonetheless, the information gleaned in the process keeps the buyer from refusing to engage with the seller altogether.