Follow the Money

58 Pages Posted: 8 Dec 2018 Last revised: 8 May 2019

See all articles by Marco Grotteria

Marco Grotteria

University of Pennsylvania, The Wharton School

Date Written: April 24, 2019


What is the connection among firm lobbying, risk and expected returns? I develop a game-theoretic asset pricing model in which firms lobby to gain or preserve monopolistic rents. The model has four key predictions. First, differences in expected returns are the equilibrium outcome of the strategic interaction among firms, and returns are higher for firms that lobby more. Second, firms that lobby more exhibit larger return volatility. Third, lobbying is less intense in more competitive industries. Fourth, and finally, firms in these industries tend to lobby in coalitions. Congressional data on lobbying spending support the model’s implications.

Keywords: Lobbying, Expected Returns, Imperfect competition, Strategic interaction

JEL Classification: G12, G32, L10, L22

Suggested Citation

Grotteria, Marco, Follow the Money (April 24, 2019). Available at SSRN: or

Marco Grotteria (Contact Author)

University of Pennsylvania, The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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