Coalition formation versus free riding in rent-seeking contests

We study lobby group formation in a two-stage model where the players rst form lobby groups that then engage in a rent-seeking contest to inuence the legislator. However, the outcome of the contest aects all players according to the ideological distance between the implemented policy and the players' preferences. The players can either lobby by themselves, form a coalition of lobbyists or free ride. We nd that free coalition formation is reasonable if either players with moderate preferences face lobby groups with extreme preferences, or if there are two opposing coalitions with an equal number of members. Otherwise, there are always free riders among the players.