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Public Choice (2005) 122: 251–276 C Springer 2005 DOI: 10.1007/s11127-005-3293-y Lobbying and regulation in a political economy: Evidence from the U.S. cellular industry ∗ TOMASO DUSO Department of Economics, University of Vienna, A-1220 Vienna, Austria; E-mail: tomaso.duso@univie.ac.at Accepted 6 June 2003 Abstract. In this paper we empirically test the simultaneity between the effects and the determinants of price regulation in the U.S. mobile telecommunications industry. We find that the regulatory regime is endogenous to firms pricing strategies. Because of lobbying successfulness, firms avoided regulation in those markets where it would have been more effective. Therefore, regulation did not significantly reduce cellular tariffs in regulated markets but it would have decreased them if adopted in non-regulated ones. Also, we provide evidence that the choice of the regulatory regime strongly depends on the political as well as regulatory environments. 1. Introduction Over the last decades, economic regulation has attracted great attention among economists and policymakers, becoming one of the main issues on the political agenda. Since the seminal contribution by Stigler (1971), and following the tradition initiated by the so called “Chicago School” (Pelzman, 1976; Posner, 1974; Becker, 1983), much theoretical literature has assumed that the political process and the competition among differently organized interest groups drive regulatory decisions. In particular, as Stigler sugges- ted, regulated industries (firms) might be willing to collaborate in their own regulation, in order to create or to protect their private interests. From the empirical point of view, though, there has been little attempt