Existence of Equilibria in Lobbying Economics

Jay Coggins, Theodore Graham-Tomasi and Terry Roe

No 7468, Bulletins from University of Minnesota, Economic Development Center

Abstract: Governments often establish economic policy in response to political pressure by interest groups. Since these groups' political activities may alter prices, economies so affected cannot be characterized by perfect competition. We develop a model of a "lobbying economy" in which consumers' choice of political activity simultaneously determines relative prices and income levels. They balance the loss in income due to lobbying payments against the potential gain in wealth from a favorable government price policy. This paper proves the existence of an equilibrium in economies of this sort. We reformulate the economy as a generalized lobbying game and prove the existence of a non-cooperative equilibrium in the game. This equilibrium is then shown to be an equilibrium in the economy.

Keywords: Political; Economy (search for similar items in EconPapers)
Pages: 29
Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umedbu:7468

DOI: 10.22004/ag.econ.7468

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