On the Efficiency of By-Product Lobbying

Wolfgang Mayer

Public Choice, 2002, vol. 112, issue 3-4, 275-92

Abstract: To explain the existence of large lobbying groups, Olson proposes a "by-product theory": large lobbies are by-products of industry associations that operate as monopolists in private goods markets. This paper explicitly formulates Olson's by-product theory of lobby funding and examines its efficiency as a funding method. Lobbying efficiency is enhanced by the association's ability to price-discriminate. Price discrimination, in turn, is facilitated by the association's superior knowledge of its members' characteristics. The paper also examines the relationship between lobby strength and industry size, as well as the question of "who exploits whom" under by-product lobbying. Copyright 2002 by Kluwer Academic Publishers

Date: 2002
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