Interest Group Lobbying, Corporate Strategy and Environmental Policy

We study three corporate non-market strategies designed to in‡uence the lobbying behavior of other special interest groups concerning environmental and/or health and safety issues: 1) “astroturf,” in which the ...rm covertly subsidizes a group with similar views to lobby when it normally would not, 2) the “bearhug,” in which the ...rm overtly subsidizes the lobbying activities of another interest group, and 3) self-regulation, in which the ...rm voluntarily limits the potential social harm from its activities. All three strategies can be used to reduce the informativeness of lobbying, and all reduce the welfare of the public decision maker. Astroturf lobbying on environmental policy issues is growing in popularity in the United States and some law makers have attempted to pass disclosure laws which would weaken the e¤ectiveness of the strategy. We show that the decision maker would bene...t by requiring the public disclosure of funds spent on astroturf lobbying, but the availability of alternative in‡uence strategies limits the impact of such a policy. JEL Numbers: L51, Q28