Mergers, lobbying, and elections: is there a "curse of bigness"?*
File(s)
Accepted version
Author(s)
Broso, Matteo
Valletti, Tommaso
Type
Journal Article
Abstract
We study the impact of mergers on quid-pro-quo lobbying and elections in a political agency model. Two incumbent firms can lobby an incumbent politician to block a pro-competitive reform. The politician’s type determines whether they are susceptible to the firms’ influence or not. A representative voter tries to infer the politician’s type monitoring the policy-making process. We show that
lobbying increases when firms merge because rents from political protection are not dissipated by price competition. While greater market concentration may increase prices and political influence, it also improves voters’ ability to screen bad politicians by observing distorted policy outcomes. This generates a novel trade-off: mergers can harm consumers through market and political power, yet
improve selection of politicians. We characterize when standard consumer welfare–based merger control is too lenient or too strict once these political economy effects are taken into account.
lobbying increases when firms merge because rents from political protection are not dissipated by price competition. While greater market concentration may increase prices and political influence, it also improves voters’ ability to screen bad politicians by observing distorted policy outcomes. This generates a novel trade-off: mergers can harm consumers through market and political power, yet
improve selection of politicians. We characterize when standard consumer welfare–based merger control is too lenient or too strict once these political economy effects are taken into account.
Date Issued
2026-07-31
Date Acceptance
2026-04-18
Citation
Journal of Law, Economics & Organization, 2026
ISSN
8756-6222
Publisher
Oxford University Press
Journal / Book Title
Journal of Law, Economics & Organization
Copyright Statement
Copyright This paper is embargoed until publication. Once published the Version of Record (VoR) will be available on immediate open access.
License URL
Publication Status
Accepted