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Public Choice (2005) 122: 251–276 C Springer 2005
DOI: 10.1007/s11127-005-3293-y
Lobbying and regulation in a political economy: Evidence from
the U.S. cellular industry ∗
TOMASO DUSO
Department of Economics, University of Vienna, A-1220 Vienna, Austria; E-mail:
tomaso.duso@univie.ac.at
Accepted 6 June 2003
Abstract. In this paper we empirically test the simultaneity between the effects and the
determinants of price regulation in the U.S. mobile telecommunications industry. We find
that the regulatory regime is endogenous to firms pricing strategies. Because of lobbying
successfulness, firms avoided regulation in those markets where it would have been more
effective. Therefore, regulation did not significantly reduce cellular tariffs in regulated markets
but it would have decreased them if adopted in non-regulated ones. Also, we provide evidence
that the choice of the regulatory regime strongly depends on the political as well as regulatory
environments.
1. Introduction
Over the last decades, economic regulation has attracted great attention
among economists and policymakers, becoming one of the main issues on
the political agenda. Since the seminal contribution by Stigler (1971), and
following the tradition initiated by the so called “Chicago School” (Pelzman,
1976; Posner, 1974; Becker, 1983), much theoretical literature has assumed
that the political process and the competition among differently organized
interest groups drive regulatory decisions. In particular, as Stigler sugges-
ted, regulated industries (firms) might be willing to collaborate in their own
regulation, in order to create or to protect their private interests.
From the empirical point of view, though, there has been little attempt
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