When the squeakiest wheel gets the most oil: Exploiting oneʹs nuisance power

In this paper, a lobby group or union may influence public policy because it is able, via a costly signal such as a boycott or a strike, to negatively impact the image of decision makers. The competence of a government is measured by its ability to do a lot with only a little money. Voters receive, through observing the level of public output, only a noisy signal of governmentʹs quality so that the lobby groups, which are better informed, may transmit to them more precise information about it. w that when unions are unbiased, i.e. have no hostility against or sympathy for the incumbent government, strikes may occur only when the government is “bad”. Consequently, a strike in this case acts as a clear, though costly, signal (to the public) of an incompetent government. ome or all unions or lobby groups are biased against the incumbent government, we show that the possibility of strikes may distort the budget allocation away from the efficient one. Bad governments have a tendency to favor their political enemies while good governments favor their political enemies only when they are not overly biased.