deletions | additions       diff --git a/sectionIntroduction_.tex b/sectionIntroduction_.tex  index 9eba7d9..e34e27f 100644  --- a/sectionIntroduction_.tex  +++ b/sectionIntroduction_.tex 
...
\section{Introduction}  In recent years, several scientific and political controversies have arisen regarding the market introduction of new products and/or new technologies. Key examples are genetically modified organisms and hydraulic fracturing to extract shale gas. In both cases, a common feature is that the regulatory decision to approve, or to ban, the new product and/or new technology, faces the challenge of balancing large economic profits against uncertain (and possibly huge) environmental and/or health detrimental effects. The stylized fact is that this has lead to large differences in regulations among countries, which may reflect the preferences of various interest groups involved in the process.\footnote{See process.  \footnote{See  Vigani and Olper (2013), for genetically modified organisms, and Johnson and Boersma (2012), for hydraulic fracturing to extract shale gas.}\bigskip{} gas.}  This paper aims at representing the government decision-making process in such situations, accounting for the intervention of interest groups in a context of scientific controversy about the environmental and/or health detrimental externalities. Specifically, we analyze a Tullock contest (Tullock, 1980), with the two contestants being an industrial and an environmental lobby. A key assumption in our model is that the industrial lobby has private information about the detrimental externality, but can be held liable for damage \textit{ex post}. In this setting, we determine the equilibrium of the contest and derive both its positive and normative properties.\bigskip{} properties.  In a sense, Cropper et al. (1992) provide an empirical background to our analysis. They examine the EPA's decision to cancel or continue the registrations of cancer-causing pesticides between 1975 and 1989. During this period, the final decision followed a two steps procedure, with the EPA first proposing a decision based on a risk-benefit analysis, and the interest groups then contesting it. Cropper et al. (1992) find that the EPA's decisions indeed balanced risks against benefits, but simultaneously that intervention by special-interest groups was also important in the regulatory process. They conclude that their ``findings provide both comfort and concern to those interested in improving the efficiency of environmental regulation'' (p. 178).\bigskip{} 178).  The main result of this paper is to provide conditions under which it is socially better that the government decides to approve, or to ban, the new product and/or new technology, according to the contest, rather than according to an \textit{ex ante} cost-benefit analysis, using his prior beliefs. The reason why this can be so, is because the \textit{ex post} liability for harm induces the industrial lobby to reveal his private information about the environmental and/or health detrimental externalities in the contest. The reason why this is not always so, is because the industrial lobby can be financially insolvent and the contest is a costly scheme. More precisely, we find that the contest outperforms the \textit{ex ante} cost-benefit analysis, if and only if the industrial lobby can lose in court a sufficient fraction of the profit earned from selling the new product/technology. We check the robustness of our main result with two extensions. On the one hand, we show that the contest should be used more carefully if there exists an incentive to free-ride within the environmental pressure group. On the other hand, we show that the contest can be used more confidently if the environmental lobby also knows the harm prior to the contest. \bigskip{} Therefore, this paper contributes to the literature which seeks to understand if and when lobbying activities can help improve the social welfare. To the best of our knowledge, this literature is not much developed, because most researches adopt the positive point of view. We briefly review below a selection of articles that shed light on this issue, with varying domains of application.  Therefore, this paper contributes Becker (1983) determines the political equilibrium resulting from the competition among pressure groups for political influence. He shows that the pressure groups have an incentive  to reduce  the literature which seeks deadweight costs of policies. Gradstein (1993) compares the performance of the private and public provisions of local public goods. Both allocation procedures create inefficiencies, the former being undermined by free riding incentives, the latter entailing socially wasteful costs of lobbying. Gradstein (1993) finds that public provision performs better when there is a small number of large jurisdictions. Aidt (1998) derives the equilibrium environmental policy in a common agency model of politics  (Grossman and Helpman, 1994), where the government seek to attract campaign contributions from lobby groups in order  to understand maximize the likelihood of being reelected. Aidt (1998) shows that the equilibrium environmental policy is the (socially optimal) Pigouvian tax  if all agents have their interests represented by an interest group. Recently, Aidt  and when lobbying can help improve Hwang (2014) have generalized  the social welfare.  To argument to  the best case  of our knowledge, this literature cross-national externalities and foreign lobbying. They show that the political equilibrium  is not much developed,  because most researches adopt the positive point of view. We briefly  review below socially efficient if all social groups are organized and all governments are equally corrupt. Finally, Graichen et al. (2001) analyze  a selection Tullock contest, where an incumbent monopolistic utility and environmentalists confront for the contract for the supply  of articles electricity. At the equilibrium, they show  that shed light on this issue,  with varying domains of application.\bigskip{} the political contest induces the monopolist to use a more environmentally friendly technology and to reduce his output.  Becker (1983) determines the political equilibrium resulting from  the competition among pressure groups for political influence. He  shows A major concern against lobbying is  that the pressure groups have an incentive rent-seeking activities induce socially wasteful costs. This issue (referred  to reduce the deadweight  costs of policies. Gradstein (1993) compares as rent dissipation) is central since  the performance of early literature on  the private and public provisions subject (Krueger, 1974). Tullock (1980) was one  oflocal public goods. Both allocation  procedures create inefficiencies,  the former being undermined by free  riding incentives, the latter entailing socially wasteful costs first to investigate it, showing that both cases  of lobbying. Gradstein (1993) finds over- and under-dissipation can arise. The same problem  has been studied in many different settings since then, showing in particular  that public provision performs better  when there it  is a small sensitive to the  number of large jurisdictions. Aidt (1998) derives players (Hillman and Riley, 1989),  the equilibrium environmental policy in a common agency model heterogeneity  ofpolitics  (Grossman and Helpman, 1994), where  the government seek to attract  campaign contributions from lobby groups in order to maximize players (Nti, 1999),  the likelihood risk aversion  ofbeing reelected. Aidt (1998) shows that the equilibrium  environmental policy is  the (socially optimal) Pigouvian tax if all  agents have their interests represented by an interest group. Recently,  Aidt players (Hillman  and Hwang (2014) have generalized the argument to Katz, 1984),  the case timing  ofcross-national externalities and foreign lobbying. They show that  the political equilibrium is socially efficient if all social groups  are organized game (Baik  and all governments are equally corrupt. Finally, Graichen  et al. (2001) analyze a Tullock contest, where an incumbent monopolistic  utility Shogren, 1992),  andenvironmentalists confront for the contract for  the supply choice  ofelectricity. At  theequilibrium, they show that the political  contest induces the monopolist to use a more environmentally friendly technology success function (Nti, 2004).  \footnote{Surveys are Hillman (2013), Konrad (2007)  and to reduce his output.\bigskip{} Long (2014).}  A major concern against lobbying is that rent-seeking activities induce  socially wasteful costs. This issue (referred to as rent dissipation)  is central since paper pursues  the early literature on the subject (Krueger, 1974).  Tullock (1980) was one same line  of the first research, which is  to investigate it, showing that  both cases understand whether the intervention  of over- and under-dissipation interest groups in the political decision-making process  can arise. help to design better regulations, or not.  The same problem  has been studied in many different settings since then, showing in  particular that it closest papers are Aidt (1998), Aidt and Hwang (2014), and Graichen et al. (2001). Our principal contribution  issensitive  to introduce  the number of players (Hillman  and Riley, 1989), the heterogeneity of the players (Nti, 1999), to  risk aversion issue  of scientific controversy about  the players (Hillman and Katz, 1984), environmental and/or health detrimental externalities, as represented by  the timing private information  of the game (Baik and Shogren, 1992), industrial lobby,  and to highlight  the choice importance  of the contest  success function (Nti, 2004).\footnote{Surveys are Hillman (2013), Konrad (2007) and Long (2014).}\bigskip{} \textit{ex post} liability system.  This paper pursues the same line More specifically, we depart from Aidt (1998) and Aidt and Hwang (2014), by using a Tullock contest, instead  of research, which is to understand  whether a common agency model of politics. Importantly, this means that  the intervention lobbying activity is viewed as costly in our setting, whereas it only involves transfers  of interest groups numeraire  inthe political decision-making  process can help to design better regulation, or not. The closest  papers are  Aidt (1998), (1998) and  Aidt and Hwang (2014), and Graichen et al.  (2001). Our principal contribution (2014). As a result, there  is to introduce less chance that  the issue intervention  ofscientific  controversy about  the environmental and/or health detrimental externalities,  as represented interest groups be optimal in this paper. Finally, we depart from Graichen et al. (2001)  by going further into  the private information of the industrial lobby,  and analysis,  to highlight investigate  the importance effect  of the \textit{ex post} liability  system.\bigskip{} contest equilibrium on the social surplus. Surprisingly, Graichen et al. (2001) did not consider this question.  More specifically, we depart from Aidt (1998) and Aidt and Hwang (2014),  by using a Tullock contest, instead of a common agency model of politics.  Importantly, this means that the lobbying activity is viewed as costly  in our setting, whereas it only involves transfers of numeraire in  Aidt (1998) and Aidt and Hwang (2014). As a result, there is less  chance that the intervention of the interest groups be optimal in  this paper. Finally, we depart from Graichen et al. (2001) by going  further into the analysis, to investigate the effect of the contest  equilibrium on the social surplus. Surprisingly, Graichen et al. (2001)  did not consider this question.\bigskip{} The paper is organized as follows. Section 2 presents the model. Section 3 determines the equilibrium of the contest game. Section 4 and 5 respectively derive the positive and normative properties of the outcome of the contest. Section 6 amends the model, by assuming in turn the possibility of free-riding within the environmental group and the possibility that both lobbies know the damage. Section 7 concludes. Proofs of most results are contained in an Appendix.