Joint with Janna Rezaee.
Building on recent work by Hirsch and Shotts (2015), we analyze a model of agency policy-making wherein an agency can only keep pace with a lobbyist in crafting high-quality policies when the president has increased its capacity with a high-capacity appointment or private contractor. Surprisingly, we find that when the lobbyist caters policy to the agency, the president is always (weakly) better off granting capacity to the agency. This may occur even though the president suffers ideological losses as the policy outcome shifts closer toward the agency, relative to when the lobbyist caters to the president. Indeed, the allocation of internal capacity to the agency by the president bids up the amount of quality that the lobbyist must put forth in order to buy off both the agency and the president. In many cases, this makes the president better off.