Lobbying for Regulation Reform by Industry Leaders

Lobbying for Regulation Reform by Industry Leaders We investigate a free-entry market in which incumbents lobby for regulatory changes that affect the cost for all firms equally. First, we investigate a model in which the lobbying affects marginal costs and incumbents produce before followers enter. We find that incumbents have an incentive to weaken or strengthen regulations depending on the simple demand condition. Next, we discuss the case of Cournot competition and illustrate that cost asymmetry may induce incumbents to engage in cost-raising lobbying. Finally, we examine a model in which lobbying affects fixed costs and find that incumbents have an incentive to strengthen regulations unless they are substantially less efficient than followers are. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Regulatory Economics Springer Journals

Lobbying for Regulation Reform by Industry Leaders

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Publisher
Springer US
Copyright
Copyright © 2017 by Springer Science+Business Media, LLC
Subject
Economics; Industrial Organization; Public Finance; Microeconomics
ISSN
0922-680X
eISSN
1573-0468
D.O.I.
10.1007/s11149-017-9334-x
Publisher site
See Article on Publisher Site

Abstract

We investigate a free-entry market in which incumbents lobby for regulatory changes that affect the cost for all firms equally. First, we investigate a model in which the lobbying affects marginal costs and incumbents produce before followers enter. We find that incumbents have an incentive to weaken or strengthen regulations depending on the simple demand condition. Next, we discuss the case of Cournot competition and illustrate that cost asymmetry may induce incumbents to engage in cost-raising lobbying. Finally, we examine a model in which lobbying affects fixed costs and find that incumbents have an incentive to strengthen regulations unless they are substantially less efficient than followers are.

Journal

Journal of Regulatory EconomicsSpringer Journals

Published: Jun 27, 2017

References

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