Impacts of Endogenously Interacting Interest Groups on Regulatory Prices

Abstract

This paper investigates how the predetermined prices in a regulated utility can affect interest groups` political activities and cause further changes in the regulatory policies. Interest groups can strategically choose their forms of interaction, and both predetermined prices and lobbying limits are considered in the lobbying influence function. Our main result shows that, the predetermined prices in the product market do have significant impacts on each group`s lobbying incentives, but neither predetermined prices nor lobbying limits can affect groups` decisions on the forms of interaction, and therefore might not have any impact on the regulatory policies.