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Strategic Lobbying By Potential Industry Entrants

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  • Amihai Glazer
  • Kai A. Konrad

Abstract

A firm which lobbies government for a change in policy, say an import tariff, can increase its profits in two ways. First, the policy can increase the profits of all firms in the industry. This effect therefore involves a free‐rider problem. Second, a firm's lobbying expenditures may signal other firms about its costs and interests. For example, a firm with low marginal costs may profit much from an import ban. Other firms which see that this firm expects to profit much from the ban may decide not to enter the industry. This may further increase the low‐cost firm's profits.

Suggested Citation

  • Amihai Glazer & Kai A. Konrad, 1995. "Strategic Lobbying By Potential Industry Entrants," Economics and Politics, Wiley Blackwell, vol. 7(2), pages 167-179, July.
    • Handle: RePEc:bla:ecopol:v:7:y:1995:i:2:p:167-179
    DOI: 10.1111/j.1468-0343.1995.tb00109.x
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    References listed on IDEAS

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    Cited by:

    1. Sam Bucovetsky & Amihai Glazer, 2006. "How To Avoid Awarding a Valuable Asset," Working Papers 050619, University of California-Irvine, Department of Economics.

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