The effect of industry concentration on free riding

The conventional wisdom regarding industry concentration and cooperative be havior has not been fully supported by the empirical literature. This paper develops a game-theoretic model to explain these mixed results. In the con text of an industry that lobbies the government for tariff protection, the model shows that the difficulty of enforcing a cooperative agreement is a f unction of not only the number of firms in the industry but also the rate o f return to lobbying. Thus, when the rate of return to lobbying expenditure s is high, the expected relationship may break down.