Protection, Lobbying, and Market Structure
We analyze a model of lobbying by oligopolists who allocate resources between lobbying and internal cost-reducing activities. We ask the following questions: (i) if firms differ with respect to comparative advantage in lobbying, what is the equilibrium allocation of resources between lobbying and cost-reducing activities? (ii) can the possibility of lobbying reverse the profitability ranking among firms? (iii) under what condition is the conventional wisdom (that highly concentrated industries tend to obtain more protection) valid?
[ - ]