CORPORATE POLITICAL OFFICES IN A RENT-SEEKING SOCIETY

This paper explores the logic of a corporation's decision whether to c reate a political lobbying department or to hire fee-for-service lobby ists. it does so by adapting the rent-seeking model of interest group behavior (Tullock 1980; Rowley, Tollison & Tullock 1988; Hillman & Ril ey 1989) in a sequential game. After the corporation decides whether o r not to create an internal political department, a public interest gr oup determines whether it will challenge a government policy that bene fits the corporation. In the final period, the corporation can continu e to fund its in-house political staff or it can hire political influe nce from outside the firm. The analysis focuses on the logic of the in teraction of the corporation and the pubic interest group. The analysi s compares the results obtained by a subgame perfect equilibrium analy sis and another game that allows the corporation to precommit itself t o a long-term political department. A variety of comparative statics r esults are discussed.