Product Market Competition and Lobbying Coordination in the U.S. Mobile Telecommunications Industry
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This paper empirically investigates market behavior and firms’ lobbying in a unified structural setup. In a sequential game, where firms lobby for regulation before they compete in the product market, we derive a testable measure of lobbying coordination. Applying the setting to the early U.S. cellular services industry, we find that lobbying expenditures, as measured by campaign contributions, and market conduct were consistent with a one-shot Nash equilibrium and that price caps were binding on average. Furthermore, campaign contributions from cellular firms effectively lowered the burden of the price caps and reduced production costs.
Keywordscollusion lobbying price caps regulation rent-seeking interest groups telecommunications
JEL ClassificationD72 L13 L51 L96 C31
We are indebted to Marc Ivaldi and Lars-Hendrik Röller for their advice and to Raja Chakir for discussing aspects of the empirical implementation. We are also grateful to Zava Aydemir, Christopher Klein, Eugenio Miravete, Jennifer Rontganger, Ralph Siebert, and seminar audiences at the WZB, the IUI in Stockholm, the meetings of the EEA, EARIE, IIOC, SEA, and EC-2, as well as three anonymous referees for their comments. The second author would like to thank the IDEI in Toulouse, where part of this paper was completed, for their hospitality. Both authors gratefully acknowledge partial financial support from the Deutsche Forschungsgemeinschaft grant number Ro 2080/4. Tomaso Duso also gratefully acknowledges financial support from the Deutsche Forschungsgemeinschaft through SFB/TR 15.
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