Lobbying for protection under uncertainty: a real option approach

Yu-Fu Chen, I-Hui Cheng

    Research output: Contribution to journalArticle

    4 Citations (Scopus)

    Abstract

    The paper explores the effect of protection lobbying by solving a firm's dynamic optimization problem where there is uncertainty about future demand, the success of lobbying and non-zero entry/exit costs. It is found that firms in declining industries tend to lobby to prevent shutting down factories during economic turndowns. In contrast, firms in growing industries tend to lobby to prevent other firms from entering the market. The degree of this effect depends on the ratio of exit costs to entry costs. It is shown that the higher the ratio, the stronger the effect.
    Original languageEnglish
    Pages (from-to)229-238
    JournalApplied Economics
    Volume37
    Issue number2
    DOIs
    Publication statusPublished - 2005

    Keywords

    • Protection
    • Lobbying
    • Uncertainty
    • Employment
    • Real options

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  • Research Output

    • 4 Citations
    • 1 Discussion paper

    Lobbying for protection under uncertainty: a real option approach

    Chen, Y-F. & Cheng, I-H., 2003, University of Dundee, (Dundee Discussion Papers in Economics; no. 155).

    Research output: Working paperDiscussion paper

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