Can political lobbying be modeled as an all-pay auction?

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Can political lobbying be modeled as an all-pay auction?

Post  adamp on Sun May 31, 2009 4:17 pm

I came across a paper recently while doing research for my Political Economy class that intrigued me from the perspective of this course. Hanming Fang of Yale's Department of Economics wrote his paper in 2002 to examine whether political lobbying can be modeled as an all-pay auction or as a lottery. These scenarios are relevant because all lobbyists must pay for their lobbying even if they don't "win" the lobbying battle.

In the all-pay auction model, the lobbyist who spends the most "wins" the policy battle; in the lottery model, lobbyists have chances to "win" proportional to how much they spend on their lobbying. This provides for some very interesting analysis. Fang concludes that each model is useful in certain situations in lobbying.

adamp

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Re: Can political lobbying be modeled as an all-pay auction?

Post  Jacquelyn S Thich on Sun May 31, 2009 6:14 pm

This is a very interesting topic. I agree in both cases that the person who spends the most time and effort will most likely win. The difference lies in that if lobbying were considered a lottery, not only the person/group who has invested the most time/effort has a chance, in the end, to win. This encourages both to spend the mos time, but a lottery doesn't guarentee a win. I, personally would prefer it to be the all pay auction, because at least then, as a lobbist, I would know what I would be getting into.

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Re: Can political lobbying be modeled as an all-pay auction?

Post  Kevin Kao on Sun May 31, 2009 6:22 pm

i came across a similar paper, written by an NU prof, while trying to find things to post on this forum.

wars and r&D (whoever makes a good product first will generally win the market) can also be considered forms of an all-pay "auction".

http://faculty.wcas.northwestern.edu/~rsi665/all-pay-contests.pdf

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Re: Can political lobbying be modeled as an all-pay auction?

Post  Ching-Yen Pai on Sun May 31, 2009 10:43 pm

Political lobbying can be well modeled as an all-pay auction.

Consider A, B, C all trying to lobby for three different options to the same issue.

If their success is solely based on the money spent on campaigning during a time period before the government decides what to with if the issue,
and if A spends $20, B spends $15, and C spends $40, the government will end up adopting C's proposal.

For A and B, since they already spent the money on campaigning, the cost is unrecoverable.

This is similar to a all-pay auction with A bidding $20, B bidding $15, and C bidding $40. C will win, but A and B still has to pay.

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