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Existence of Equilibria in Lobbying Economics

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  • Coggins, Jay S.
  • Graham-Tomasi, Theodore
  • Roe, Terry L.

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.

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Bibliographic Info

Paper provided by University of Minnesota, Economic Development Center in its series Bulletins with number 7468.

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Date of creation: 1988
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Handle: RePEc:ags:umedbu:7468

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Keywords: Political economy; rent seeking; generalized game; lobbying equilibrium; Political Economy;

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  1. Ronald Findlay & Stanislaw Wellisz, 1982. "Endogenous Tariffs, the Political Economy of Trade Restrictions, and Welfare," NBER Chapters, in: Import Competition and Response, pages 223-244 National Bureau of Economic Research, Inc.
  2. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, vol. 78(4), pages 719-45, September.
  3. Elie Appelbaum & Eliakim Katz, 1986. "Transfer seeking and avoidance: On the full social costs of rent seeking," Public Choice, Springer, vol. 48(2), pages 175-181, January.
  4. Debreu,Gerard Introduction by-Name:Hildenbrand,Werner, 1986. "Mathematical Economics," Cambridge Books, Cambridge University Press, number 9780521335614, April.
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