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Entry Regulation and the Influence of an Incumbent Special Interest Group

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  • John Evans
  • John Fingleton

Abstract

The literature on both entry deterrence and the influence of special interest groups is extensive. In this paper we attempt to marry these strands of literature by developing a model of entry deterrence through interest group influence in an entry re-regulation context. In contrast to other entry deterrence models, we are able to investigate how product market rivalry affects the regulator's equilibrium entry decision, firms' output decisions, entry deterring activities and equilibrium welfare. We find that in equilibrium more collusive industries tend to lobby more but that the regulator attempts to compensate for weak price rivalry by allowing greater entry. The latter effect tends to offset the former, possibly entirely so that the overall welfare effect is ambiguous.

Suggested Citation

  • John Evans & John Fingleton, 2002. "Entry Regulation and the Influence of an Incumbent Special Interest Group," CESifo Working Paper Series 787, CESifo.
    • Handle: RePEc:ces:ceswps:_787
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    File URL: https://www.cesifo.org/DocDL/cesifo_wp787.pdf
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    References listed on IDEAS

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    1. Timothy Besley & Stephen Coate, 2003. "Elected Versus Appointed Regulators: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1176-1206, September.
    2. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-489, March.
    3. Laffont, Jean-Jacques, 1996. "Industrial policy and politics," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 1-27.
    4. McCormick, Robert E & Shughart, William F, II & Tollison, Robert D, 1984. "The Disinterest in Deregulation," American Economic Review, American Economic Association, vol. 74(5), pages 1075-1079, December.
    5. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    6. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
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    Cited by:

    1. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    2. Rajan, Raghuram & Laeven, Luc & Klapper, Leora F., 2004. "Business Environment and Firm Entry: Evidence from International Data," CEPR Discussion Papers 4366, C.E.P.R. Discussion Papers.

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