On the Formation of Industry Lobby Groups
Posted: 16 Jan 2001
This paper provides a step towards a more complete theory of lobbying, extending the menu-auction model of Grossman and Helpman [Grossman, G.M., Helpman, E., 1994. American Economic Review 84, 833-850] A new explanation is proposed for why more concentrated industries more easily overcome the free-rider problem inherent in political collective action. Instead of focusing on transactions costs as Olson [Olson, M., 1965. The Logic of Collective Action, Harvard University Press, Cambridge, MA], we show that more collusive industries with higher collusive profits have a greater incentive to form lobby groups and to contribute to industry lobbying. Moreover, more polluting industries also have a greater incentive to form and contribute to a lobby group.
Keywords: lobby group formation, collective action, collusion, pollution tax
JEL Classification: H2, L13, L2, L5, Q2
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