How to Win the Political Contest: A Monopolist vs. Environmentalists
This paper sheds light on the political economy of local energy politics both from a theoretical and an empirical perspective. First, a case study of a small town in Southern Germany (Schonau) is presented, where environmentalists have won the political contest against the regional energy monopolist and have founded an energy supply firm themselves. The different stages of the political process are explained and analysed. Second, a political economy model is developed, where environmentalists and a monopolistic utility firm confront each other both on the political and on the energy market. In the lobbying equilibrium the probability of the environmentalists' winning the game depends on the monopoly rent and the perceived social costs of energy production. It is shown that it is optimal for the monopolist to reduce his output below the monopolistic output. Finally, the winning strategy in the Schonau case is discussed in the light of the theoretical results of the paper. Copyright 2001 by Kluwer Academic Publishers
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