INTEREST GROUPS are ubiquitous in U.S.politics and in the political systems of most nations. In some countries, interest groups are closely aligned with political par-ties and exercise influence through those

In Special Interest Politics Gene Grossman and Elhanan Helpman examine how special-interest groups influence political outcomes for the benefit of their members. The authors take interest groups seriously by considering a range of theories and supporting evidence on interest group activity. Their book provides perspectives on how to study interest group politics and a set of methods for that study. Although the authors present a number of standard models, the book contains much that is new. The reader takes away a multitude of results, tools, models, and new research ideas. The result is an outstanding book full of insight, useful methods, and perspective.

The purpose of this paper is to indicate that the opportunity to obtain information regarding the probability distribution of the return on a risky asset, such as a portfolio or a mutual fund, may cause a risk-averse decision maker to accept a single-period actuarially unfair gamble. This behavior is the same as that implied by utility functions that have convex segments, as originally considered by Friedman and Savage [2] and by Markowitz [12], but the utility function derived is not convex on any interval, since it is the envelope of a finite set of strictly increasing, strictly concave functions. Similar utility functions have been obtained, by Fleming [1] because of transactions costs, by Hakansson [4] by imposing a borrowing restriction on an investment-consumption model, and by Masson [14] in the context of an imperfect capital market. In this paper acceptance of single-period actuarially unfair gambles by an individual risk averse with respect to future wealth levels results from the opportunity to acquire information. The acquisition of information creates a set of conditional decisions each of which the individual may treat in an optimal manner, and that set of conditional decisions may induce risk-taking behavior.

Candidates for office are modeled as promising services, such as support for legislation and intervention in the bureaucracy, to interest groups in exchange for campaign contributions. An electoral equilibrium is characterized in which candidates choose service-contribution offers and interest groups choose whether to contribute. The model provides several explanations of congressional incumbents' success in over 90 percent of their reelection contests: a recognition advantage, a high personal valuation of the office, a lower cost of providing services, and policy alignment with high demand interest groups. The model yields predictions that are consistent with empirical findings on the relation between campaign contributions and election outcomes.

An increasing segment of economic activity is taking place in nonmarket situations in which economic agents act outside the traditional markets or create markets to deal with specific resource allocation problems. One such problem involves the selection by a buyer of a contractor using a competitive bidding process. Competitive bidding is used extensively by the government for the selection of suppliers of goods and services and for the sale of resources such as offshore oil leases. Firms may use competitive bidding for the selection of certain suppliers of factor inputs and may attempt to sell certain products in markets in which competitive price quoting is the established market mechanism. This paper is concerned with a bidding process in which a firm has an opportunity to bid on a project under the terms of an incentive contract. Incentive contracts

Self-regulation is the private provision of public goods and private redistribution. This paper examines the scope of self-regulation motivated by altruistic moral preferences that are reciprocal and stronger the closer are citizens in a socioeconomic distance. The focus is on the role of organizations in increasing self-regulation by mitigating free-rider problems. Social label and certification organizations can expand the scope of self-regulation but not beyond that with unconditional altruism. Enforcement organizations expand the scope of self-regulation farther, and for-profit enforcement is more aggressive than non-profit enforcement. Enforcement through social pressure imposed by NGOs also expands the scope of self-regulation.