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Political Power and Market Power

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  • Bo Cowgill
  • Andrea Prat
  • Tommaso Valletti

Abstract

We study the link between political influence and industrial concentration. We present a joint model of political influence and market competition: an oligopoly lobbies the government over regulation, and competes in the product market shaped by this influence. We show broad conditions for mergers to increase lobbying, both on the intensive margin and the extensive margin. We combine data on mergers with data on lobbying expenditures and campaign contributions in the US from 1999 to 2017. We document a positive association between mergers and lobbying, both by individual firms and by industry trade associations. Mergers are also associated with extensive margin changes such as the formation of in-house lobbying teams and corporate PACs. We find some evidence for a positive association between mergers and higher campaign contributions.

Suggested Citation

  • Bo Cowgill & Andrea Prat & Tommaso Valletti, 2021. "Political Power and Market Power," Papers 2106.13612, arXiv.org, revised May 2023.
    • Handle: RePEc:arx:papers:2106.13612
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    Cited by:

    1. Budzinski, Oliver, 2021. "Wettbewerbsordnung und digitale Medienmärkte," Ilmenau Economics Discussion Papers 153, Ilmenau University of Technology, Institute of Economics.

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    JEL classification:

    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other

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