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Uncertainty-driven symmetry-breaking and stochastic stability in a generic differential game of lobbying

Raoul Bouccekine (), Fabien Prieur (), " Weihua Ruan" () and Benteng Zou ()
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Raoul Bouccekine: Aix-Marseille Université
" Weihua Ruan": Purdue University Northwest

Authors registered in the RePEc Author Service: Raouf Boucekkine ()

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: We study a 2-players stochastic differential game of lobbying. Players have opposite interests; at any date, each player invests in lobbying activities to alter the legislation, the continuous state variable of the game, in her own benefit. The payoffs are quadratic and uncertainty is driven by a Wiener process. We prove that while a symmetric Markov Perfect Equilibrium (MPE) always exists, (two) asymmetric MPE only emerge when uncertainty is large enough. In the latter case, the legislative state converges to a stationary invariant distribution. We fully characterize existence and stochastic stability of the legislative state for both types of MPE. We finally study the implications for rent dissipation asymptotically. We show in particular that while the average rent dissipation is lower with asymmetric equilibria relative to the symmetric, the former yield larger losses at the most likely asymptotic states for large enough but moderate uncertainty.

Keywords: "Political lobbying; symmetric versus asymmetric equilibrium; stochastic differential games; stochastic stability; social cost of lobbying." (search for similar items in EconPapers)
JEL-codes: C73 D72 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-gth, nep-mic and nep-ore
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