Abstrakt
We explain Tullock's puzzle of small payments from special interests to policymakers by the hold-up problem between the two parties. We construct a simple lobbying environment where an uninformed policy-maker is a price-setter who sells access to two opposed and privately informed lobbyists.
The key equilibrium property is "the curse of the ex ante favored lobbyist"; the lobbyist proposing a project with the higher expected public value ends up worse off than the lobbyist proposing a project with the lower expected public value.