Entry Regulation and the Influence of an Incumbent Special Interest Group
The literature on both entry deterrence and the influence of special interest groups is extensive. In this paper we attempt to marry these strands of literature by developing a model of entry deterrence through interest group influence in an entry re-regulation context. In contrast to other entry deterrence models, we are able to investigate how product market rivalry affects the regulator's equilibrium entry decision, firms' output decisions, entry deterring activities and equilibrium welfare. We find that in equilibrium more collusive industries tend to lobby more but that the regulator attempts to compensate for weak price rivalry by allowing greater entry. The latter effect tends to offset the former, possibly entirely so that the overall welfare effect is ambiguous.
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- McCormick, Robert E & Shughart, William F, II & Tollison, Robert D, 1984. "The Disinterest in Deregulation," American Economic Review, American Economic Association, vol. 74(5), pages 1075-1079, December.
- Timothy Besley & Stephen Coate, 2003.
"Elected Versus Appointed Regulators: Theory and Evidence,"
Journal of the European Economic Association,
MIT Press, vol. 1(5), pages 1176-1206, September.
- Besley, Timothy J. & Coate, Stephen, 2000. "Elected Versus Appointed Regulators: Theory And Evidence," CEPR Discussion Papers 2381, C.E.P.R. Discussion Papers.
- Stephen Coate & Timothy Besley, 2000. "Elected versus Appointed Regulators: Theory and Evidence," NBER Working Papers 7579, National Bureau of Economic Research, Inc.
- Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-489, March.
- Laffont, Jean-Jacques, 1996. "Industrial policy and politics," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 1-27.
- Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
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