Mergers, Lobbying, and Elections: Is there a "Curse of Bigness"?

47 Pages Posted: 12 Jul 2024

See all articles by Matteo Broso

Matteo Broso

University of Turin - Collegio Carlo Alberto

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Date Written: July 09, 2024

Abstract

We study the impact of market concentration on elections and lobbying in a political agency model with adverse selection and moral hazard. Two incumbent firms can lobby a politician (P) to prevent a pro-competitive reform. P's type determines whether they care about bribes or not. A representative voter tries to infer P's type monitoring the policymaking process. We investigate the welfare implications of a merger between the two firms. In equilibrium, the merger increases firms' incentives to lobby and their ability to influence politics. This additional political power reduces the chances that the pro-competitive reform is approved, hurting consumers; but it allows the voter to defeat a corruptible P with higher probability. Thus, it improves the voter's screening and mitigates adverse selection. We discuss how this new trade-off interacts with traditional competition considerations in the merger's assessment.

Keywords: Lobbying, Political Agency, Mergers and Acquisitions, Antitrust JEL Classification P16, L41, D72, G34

JEL Classification: P16, L41, D72, G34

Suggested Citation

Broso, Matteo and Valletti, Tommaso M., Mergers, Lobbying, and Elections: Is there a "Curse of Bigness"? (July 09, 2024). Available at SSRN: https://ssrn.com/abstract=4890669 or http://dx.doi.org/10.2139/ssrn.4890669

Matteo Broso

University of Turin - Collegio Carlo Alberto ( email )

Piazza Albarello , 8
Turin
Italy

Tommaso M. Valletti (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
77
Abstract Views
275
Rank
607,800
PlumX Metrics