The Effect of Number and Size of Interest Groups on Social Rent Dissipation

This paper develops two models of the lobbying of interest groups to examine the effect of the number and size of interest groups on rent dissipation. In cases where individuals ignore the effect of the lobbying activities on the rent size, the number of groups is negatively related to rent dissipation and there exists an inverse relation between the extent of egalitarianism of within-group rent sharing rules and the total rent dissipation in the symmetric setting. Model two examines the case where each individual in each group takes into account the effect of lobbying activities on the total “pie”, of which she/he competes for a share through within-group and between-group interaction. The relation between the number of symmetric groups and the total rent dissipation is shown to be an inverted “U”-shape, contrary to the conventional wisdom that holds a monotonous relation between the two variables.