Lobbying

Question 1

Why is noise important in the lobbying model?

Answer 1

Without noise, parties could spend $0.01 more than opponent and pick same political stance as them and win with probability of 1.

Question 2

What is the conclusion of lobbies regarding the chance of a party winning

Answer 2

Lobbying has no impact on the chances of a party winning, it only impacts the policy that said party implements.

Question 3

What is the Lobbying theorem?

Answer 3

There exists a unique equilibrium. This equilibrium is such that lobby L offers contract (yL, tL) and lobby R offers contract (yR, tR) where both contracts are accepted and such that the participation constraint of both parties binds.

Question 4

What happens with lobbies and polarization?

Answer 4

The party accepting the contract of the lobby with the highest valuation adopts a more polarized position than the other party. Other party becomes less polarized as valuation increases.