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Symmetric vs asymmetric equilibria and stochastic stability in a dynamic game of legislative lobbying

Author

Listed:
  • Raouf Boucekkine

    (Aix-Marseille University)

  • Fabien Prieur

    (Paris-X Nanterre University)

  • Benteng Zou

    (CREA, Université du Luxembourg)

Abstract
We study a 2-players stochastic dynamic symmetric lobbying differential game. Players have opposite interests; at any date, each player invests in lobbying ac- tivities to alter the legislation 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, an asymmetric MPE only emerges when uncertainty is large enough. In the latter case, the legislative state converges to a stationary invariant distribution. Interestingly enough, the implications for the rent dissipation problem are much more involved than in the deterministic coun- terpart: the symmetric MPE still yields a limited social cost while the asymmetric may yield significant losses. We also characterize the most likely asymptotic state, in particular regarding the level of uncertainty.

Suggested Citation

  • Raouf Boucekkine & Fabien Prieur & Benteng Zou, 2018. "Symmetric vs asymmetric equilibria and stochastic stability in a dynamic game of legislative lobbying," DEM Discussion Paper Series 18-03, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:18-03
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Political lobbying; symmetric versus asymmetric equilibrium; stochastic differential games; stochastic stability; social cost of lobbying;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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