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Welfare effects of competitive lobbying efforts in international oligopoly markets

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  • Kim, Young-Han
  • Kim, Sang-Kee

Abstract

Conventionally, rent-seeking activities have been considered to deteriorate social welfare and to distort resource allocation. This paper examines whether rent-seeking behavior can improve social welfare by focusing on the welfare effects of firms’ competitive lobbying efforts when governments can impose market entry regulation against foreign firms. We demonstrate that competitive lobbying efforts can improve social welfare when such lobbying efforts are directed to reduce market entry barriers. In addition, social welfare can be maximized when the government shows the maximum sensitivity to the foreign firm's political contributions while maintaining competitive market structure. Moreover, it is shown that the dominant strategy for a domestic firm is to allocate more resources to R&D sectors while it is optimal for foreign firms is to exert more efforts in lobbying to reduce the market entry barriers when a government makes political economic approach in market entry regulations.

Suggested Citation

  • Kim, Young-Han & Kim, Sang-Kee, 2012. "Welfare effects of competitive lobbying efforts in international oligopoly markets," Economic Modelling, Elsevier, vol. 29(3), pages 614-620.
  • Handle: RePEc:eee:ecmode:v:29:y:2012:i:3:p:614-620
    DOI: 10.1016/j.econmod.2012.01.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Rent-seeking behavior; Competitive lobbying; Market entry regulations; R&D investment and lobbying efforts; Strategic competition;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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