The Effect of Industry Concentration on Free Riding

The Effect of Industry Concentration on Free Riding The conventional wisdom regarding industry concentration and cooperative behavior has not been fully supported by the empirical literature. This paper develops a game-theoretic model to explain these mixed results. In the context of an industry that lobbies the government for tariff protection, the model shows that the difficulty of enforcing a cooperative agreement is a function of not only the number of firms in the industry but also the rate of return to lobbying. Thus, when the rate of return to lobbying expenditures is high, the expected relationship may break down. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

The Effect of Industry Concentration on Free Riding

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1011813009129
Publisher site
See Article on Publisher Site

Abstract

The conventional wisdom regarding industry concentration and cooperative behavior has not been fully supported by the empirical literature. This paper develops a game-theoretic model to explain these mixed results. In the context of an industry that lobbies the government for tariff protection, the model shows that the difficulty of enforcing a cooperative agreement is a function of not only the number of firms in the industry but also the rate of return to lobbying. Thus, when the rate of return to lobbying expenditures is high, the expected relationship may break down.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 3, 2004

References

  • The Political Economy of Administered Protection
    Finger, M.; Hall, H. K.; Nelson, D.
  • Protection for Sale: An Empirical Investigation
    Goldberg, P. K.; Maggi, G.

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