Group-Size Effects on the Endogenous Tariff in a Lobbying Competition Model

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This paper presents a simple two-stage lobbying competition model of tariff determination. In the first stage, domestic firms lobby for tariff protection, an anti-tariff group of domestic consumers or foreign firms lobbies against tariff protection and then the government sets a specific tariff rate. In the second stage, given the tariff rate determined in the first stage, domestic and foreign firms set their output level à la Cournot. This paper will show in the lobbying competition model with a specific functional form that the equilibrium tariff rate can be a non-monotone function of the number of agents in an interest group.

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