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Journal of Regulatory Economics

, Volume 52, Issue 1, pp 63–76 | Cite as

Lobbying for Regulation Reform by Industry Leaders

  • Toshihiro Matsumura
  • Atsushi YamagishiEmail author
Original Article

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.

Keywords

Lobbying Common costs Free-entry market Stackelberg Regulation costs 

JEL Classification

D43 L51 L13 

Notes

Acknowledgements

The authors thank Keisuke Hattori, Hong Hwang, Kuo-Feng Kao, Noriaki Matsushima, Cheng-Hau Peng, and seminar participants at the National Taiwan University, Shinshu University, and Osaka University for their helpful comments. We are also indebted to an anonymous referee for his/her precious and constructive comments and suggestions. The first author acknowledges financial support from JSPS KAKENHI Grant Number 15K03347 and Zengin Foundation for Studies on Economics and Finance. The authors acknowledge responsibility for any remaining errors.

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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Institute of Social ScienceThe University of TokyoTokyoJapan
  2. 2.Graduate School of EconomicsThe University of TokyoTokyoJapan

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