To lobby or not to lobby: How to decide whether you should manipulate your government

A company will lobby government in order to influence a decision that will effect them. This effect is usually economic, so the company will lobby in order to give themselves the best economic outcome. However there is a trade-off for the company: they can lobby government to benefit themselves economically, however lobbying costs money which isn’t economically beneficial. So when does a company decide to lobby or not? And how do they decide the amount of money to spend on lobbying? This blog post shall explore the question from an economic point of view. First it shall describe supply-demand, externalities and Pigovian tax, then it shall describe how a company can make a decision based on this framework. Continue reading