| When economic actors are also allowed to become politically active, perhaps to influence a government price policy, they face decision problems with essentially simultaneous political and economic features. If, in addition, two groups struggle to pull the administered price level in opposite directions, an important strategic component is introduced. On two levels, then, such situations depart from the competitive economy framework of Arrow and Debreu. The model of this paper is designed to reconcile the general equilibrium model with politically active interest groups. This model is then used to assess the welfare consequences of such lobbying activity. We find that very often a lobbying program with price distortions is not the best means for regulating... |
