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Astroturf: Interest Group Lobbying and Corporate Strategy

Thomas Lyon () and John Maxwell ()

No 2004-18, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: We study three corporate nonmarket strategies designed to influence the lobbying behavior of other special interest groups: (1) astroturf, in which the firm covertly subsidizes a group with similiar views to lobby when it normally would not; (2) the bear hug, in which the firm overtly pays a group to alter its lobbying activitives; and (3) self-regulation, in which the firm voluntarily limits the potential social harm from its activities. All three strategies reduce the informativeness of lobbying, and all reduce the payoff of the public decision-maker. We show that the decision-maker would benefit by requiring the public disclosure of funds but that the availability of alternative strategies limits the impact of such a policy.

Date: 2004
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Published in Journal of Economics and Management Strategy, 2004

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