CAN LOBBYING PREVENT ANTICOMPETITIVE OUTCOMES? EVIDENCE ON CONSUMER MONOPSONY IN TELECOMMUNICATIONS

Dino Falaschetti

Journal of Competition Law and Economics, 2008, vol. 4, issue 4, 1065-1096

Abstract: When basic competition rules cannot stop market power abuses, industry-specific regulations can improve economic performance. But regulations are also more immediately exposed to political pressures than are judicially administered antitrust laws, and this exposure can cause regulations to serve distributional rather than efficiency goals. Instead of supporting a Chicago School hypothesis where distributional forces tend to favor producers, however, I find evidence that regulations can inefficiently expand consumer surplus when producers lack a political voice. In particular, local exchange carriers maintain significantly smaller capital stocks in states that restrict campaign contributions from regulated utilities. This relationship is difficult to rationalize as either a statistical artifact or evidence that campaign finance laws discourage producers from restraining trade. Indeed, rather than endowing producers with political currency to capture regulators, allowances for campaign contributions appear to have strengthened competition by discouraging regulatory takings and balancing monopsonistic pressures from consumer-voters. These results highlight an empirically important potential for regulations to overly favor consumers, and strengthen arguments against consumer surplus as an objective for competition policies.

JEL-codes: D72 E61 H11 K23 L43 L51 L96 M38 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

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