Mergers, Lobbying, and Elections: Is there a “Curse of Bigness”? | 국외연구자료

KDI 경제교육·정보센터

Economic Information and Education Center

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Mergers, Lobbying, and Elections: Is there a “Curse of Bigness”?

CEPR

2026.05.26

We study the impact of mergers on quid-pro-quo lobbying and elections in a political agency model. Two incumbent firms can lobby an incumbent politician to block a pro-competitive reform. The politician’s type determines whether they are susceptible to the firms’ influence or not. A representative voter tries to infer the politician’s type monitoring the policy-making process. We show that lobbying increases when firms merge because rents from political protection are not dissipated by price competition. While greater market concentration may increase prices and political influence, it also improves voters’ ability to screen bad politicians by observing distorted policy outcomes. This generates a novel trade-off: mergers can harm consumers through market and political power, yet improve selection of politicians. We characterize when standard consumer welfare？based merger control is too lenient or too strict once these political economy effects are taken into account.

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