Political Research Quarterly Volume xx Number x Month XXXX xx-xx © 2007 University of Utah 10.1177/1065912907307290 http://prq.sagepub.com hosted at http://online.sagepub.com 1 Allocating Lobbying Resources between Collective and Private Rents R. Kenneth Godwin University of North Carolina, Charlotte Edward J. Lopez San Jose State University, California Barry J. Seldon University of Texas–Dallas How do firms allocate their lobbying resources among their political goals? The authors approach this question using a game-theoretic model that integrates three concepts from the lobbying literature: the distinction between private and collective rents, the competition for a rent, and the impacts of political institutions. The model indicates how compe- tition and political institutions affect lobbying expenditures and expected net returns for private and collective lobby- ing. The outcomes predicted differ with those of past formal models and produce the counterintuitive expectation that competition typically reduces expenditures. The authors test the model’s predictions by examining the lobbying deci- sions of sixty-two firms. Keywords: lobbying; rent-seeking; private goods; collective goods; competition; institutional friction; policy mak- ers’ costs; collective action N umerous government decisions can benefit or harm a firm, and if the firm chooses to lobby, it must decide which basket of lobbying efforts will yield the greatest net benefits (rents). We argue that this cal- culation involves three parameters: institutional fric- tions that raise the costs to policy makers of providing a rent, competition from other interests, and whether the rent is private or collective. We develop a simple game-theoretic model that includes all three parameters and explore the model’s predictions using numerical examples and interviews with lobbyists. The model predicts that under most situations, increasing the value of institutional frictions or competition decreases a firm’s lobbying expenditures and that firms will prefer private rather than collective rents. The finding on com- petition contrasts with previous models and the private goods result is new. The interviews show why compe- tition has this effect and suggest why previous studies of industries found only weak support for Olson’s (1965) collective action hypothesis. The article is divided into five sections. The first reviews the empirical studies and formal models that address the issues in this article. The second develops the model and provides its definitions and assump- tions. The third shows how varying the institutional friction and competition parameters affects whether firms will allocate their resources to private or col- lective rents. The fourth uses interviews with lobby- ists to illustrate the predictive ability of the model, and the final section discusses the model’s implica- tions for public policy. Important Factors in Lobbying Decisions When deciding on which issues it will lobby, firms must consider the institutional constraints on policy makers (Denzau and Munger 1986; Weingast and Marshall 1988). For example, will providing a rent have positive or negative electoral implications for the relevant elected officials? Must the firm’s lobby- ists shepherd a proposal from getting it on the politi- cal agenda all the way through the legislative process, or does the firm need only to find a single point in a friendly subcommittee where it can kill a hostile pro- posal? If the bureaucracy is handing the rent, is the firm’s desired outcome consistent with the agency’s mission (Bawn 1997)? Firms also must consider the level of competition from other interests (Tullock 1967). What resources does the opposition have, and how willing is it to spend them? Finally, firms must