Abstract
This paper explores the logic of a corporation's decision whether to create a political lobbying department or to hire fee-for-service lobbyists. it does so by adapting the rent-seeking model of interest group behavior (Tullock 1980; Rowley, Tollison & Tullock 1988; Hillman & Riley 1989) in a sequential game. After the corporation decides whether or not to create an internal political department, a public interest group determines whether it will challenge a government policy that benefits the corporation. In the final period, the corporation can continue to fund its in-house political staff or it can hire political influence from outside the firm. The analysis focuses on the logic of the interaction of the corporation and the public interest group. The analysis compares the results obtained by a subgame perfect equilibrium analysis and another game that allows the corporation to precommit itself to a long-term political department. A variety of comparative statics results are discussed.
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Johnson, P.E. Corporate political offices in a rent-seeking society. Public Choice 88, 309–331 (1996). https://doi.org/10.1007/BF00153236
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DOI: https://doi.org/10.1007/BF00153236