Size, Fungibility, and the Strength of Lobbying Organizations

How can a small special interest group successfully get an ine cient transfer at the expense of a much larger group with many more resources available for lobbying? We consider a simple model of collusive organizations that provide a public good in the form of e ort and have a xed cost per member of acting collusively. Our key result is that the willingness of such a group to pay for a given prize depends on whether the prize is fungible that is, whether the prize can be used to pay for itself. If the prize is fungible, as in the case of a transfer payment, a smaller group always has an advantage. If the prize is non-fungible civil rights for example willingness to pay rst increases then decreases with the size of the group. We use the theory to study agenda setting both with and without blackmail by the politician showing that in general the small group is not too greedy: when it wins it optimally chooses to preempt the large group by choosing a prize small enough to equal the large group participation cost. JEL Classi cation Numbers: C72 Noncooperative Games D7 Analysis of Collective Decision-Making D72 Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior