A theory of political acquisitions
File(s)
Accepted version
Author(s)
Broso, Matteo
Valletti, Tommaso
Type
Journal Article
Abstract
We study a dynamic model where a firm can grow in size by acquiring competitors and lobby office-seeking politicians. When the firm is distressed, the incumbent politician loses the office with some probability. Larger firms are less likely to experience distress but their distress has more severe political consequences. To prevent these, politicians can offer political support to the firm. We show that, in equilibrium: (i) the level of political support is non-monotone in the firm’s size; (ii) the firm can complete acquisitions just to extract political support; and (iii) the number of these “Political Acquisitions” is non-monotone in the strength of politicians’ re-election incentives.
Date Acceptance
2026-08-17
Citation
Journal of Institutional and Theoretical Economics
ISSN
0932-4569
Publisher
Mohr Siebeck
Journal / Book Title
Journal of Institutional and Theoretical Economics
Copyright Statement
This paper is embargoed until publication. Once published will be under a 12 months embargo.
Publication Status
Accepted