Collective vs. individual lobbying

Norimichi Matsueda

European Journal of Political Economy, 2020, vol. 63, issue C

Abstract: This paper presents a menu-auction model in which firms lobby the government to make an environmental regulation less burdensome. In this lobbying game, industrial interests are opposed by an environmental interest group. We compare political outcomes under two institutional arrangements. In the first, firms must join an organization that represents the interests of the industry. In the second, firms would lobby the government individually. The two arrangements result in strikingly different equilibrium outcomes. Only a small fraction of firms join the lobby group under collective lobbying, but all firms participate in lobbying activities when there is no such group. Thus, an attempt by firms to solve the apparent collective action problem through coordination would effectively backfire. The reason is that coordination among firms would increase the leverage available to the government, to demand high political contributions. We also evaluate the desirability of the two lobbying regimes from the private perspective of individual firms, and from the perspective of society as a whole. This permits us to evaluate possible restrictions on lobbying activities.

Keywords: Common agency; Compensating equilibrium; Environmental regulation; Free-rider; Lobbying (search for similar items in EconPapers)
JEL-codes: D72 H41 Q58 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Collective vs. Individual Lobbying (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:63:y:2020:i:c:s0176268020300070

DOI: 10.1016/j.ejpoleco.2020.101859

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