Size, fungibility and the strengh of lobbying organizations

Abstract

How can a small special interest group successfully get an inefficient transfer at the expense of a much larger group with many more resources available for lobbying? We consider a simple model of collusive organizations that provide a public good in the form of effort and have a fixed cost per member of acting collusively. Our key result is that the willingness of such a group to pay for a/ngiven prize depends on whether the prize is fungible - that is, whether the prize can be used to pay for itself. If the prize is fungible, as in the case of a transfer payment, a smaller group always has an advantage. If the prize is non-fungible - civil rights for example - willingness to pay first increases then decreases with the size of the group. We use the theory to study agenda setting/nboth with and without blackmail by the politician showing that in general the small group is not too greedy: when it wins it optimally chooses to pre-empt the large group by choosing a prize small enough to equal the large group participation cost.