Endogenous lobbying positions

This paper develops a two‐country, two‐firm model to study equilibrium lobbying positions in intra‐industry trade. A firm chooses either a protectionist position or a free‐trade position. The model predicts that taking the free‐trade lobbying position is an efficient firm's dominant strategy. If two firms have high costs (or when the demand is very weak), there exist two equilibria: either both firms take the free‐trade position or both take the protectionist lobbying position. In other cases, both firms taking the free‐trade lobbying position is a unique equilibrium.