| I address two questions associated with the social cost of lobbying contests between a monopolist and rent-defending consumers. First, I introduce a collection action problem on the part of the consumers and compare the social cost from rent-defending consumers with the cost from passive consumer groups. I ask how this refinement changes the results from Ellignsen (1991). I show that the restrictions on the deadweight loss and profits from Elligenson(1991) can be relaxed when consumers are able to free ride from the group. Consequently, there has been an underestimation in number of cases in which the social cost is lower when the consumer engage in rent defense than when they passively accept the monopoly price. Second, I explain the lack of empirical examples of a rent-defending consumer group through the monopolist's pricing rule in a repeated environment. Sufficient conditions are derived under which the monopolist is able to give a price concession in exchange for the consumer's non-participation in lobbying. |
