Present-Biased Lobbyists in Linear Quadratic Stochastic Differential Games
Abstract
We investigate a linear quadratic stochastic zero-sum game where two players lobby a political representative to invest in a wind turbine farm. Players are time-inconsistent because they discount performance with a non-constant rate. Our objective is to identify a consistent planning equilibrium in which the players are aware of their inconsistency and cannot commit to a lobbying policy. We analyze the equilibrium behavior in both single player and two-player cases, and compare the behavior of the game under constant and non-constant discount rates. The equilibrium behavior is provided in closed-loop form, either analytically or via numerical approximation. Our numerical analysis of the equilibrium reveals that strategic behavior leads to more intense lobbying without resulting in overshooting.
Cite
@article{arxiv.2304.11577,
title = {Present-Biased Lobbyists in Linear Quadratic Stochastic Differential Games},
author = {Ali Lazrak and Hanxiao Wang and Jiongmin Yong},
journal= {arXiv preprint arXiv:2304.11577},
year = {2023}
}