Interest Group Competition over Policy Outcomes: Dynamics,Strategic Behavior,and Social Costs

This paper analyzes a two-period model of interestgroup competition between two groups to affect thepolicy outcome. The paper characterizes the subgameperfect equilibrium and considers the welfareimplications of the model. The subgame perfectequilibrium to this game is allocatively efficient ifand only if the initial equilibrium is allocativelyefficient and interest groups are equally adept atproducing political pressure. When rent seeking isconstitutionally protected, the notion of rent-seekingconstrained efficiency is defined as the cooperativesolution to the rent-seeking game. It is shown that arent-seeking constrained efficient equilibrium isattainable by forcing winners in political competitionto fully compensate losers.