We analyze how institutions determine the emergence, organization, and strategies of interest
groups, as well as their impacts on economic performance. In early self-interest models of interest
group competition, legislators respond to the demand for redistribution so as to maximize
their net political support. Adding institutional details about the supply of redistribution nests
interest group competition in a web of principal agent relations characterized by information
asymmetries that lead to second and third best outcomes. Interest group competition is a form
of social choice over the allocation and redistribution of resources in society. As such, the process
is subject to the instability and chaos results of Social Choice Theory. In most real-world situations,
however, stability is achieved through institutions that delimit the choices and promote
a structure-induced equilibrium. Interest group organization and strategies are thus crucially
determined by the political institutions of the specifi c context. At the same time, interest groups
can also try to change the rules of the game, in which case institutions become endogenous.
