Dynamic Lobbying Conflicts

Abstract

This paper analyzes a dynamic lobbying model in which two antagonistic lobbies compete with each other for a prize over two time periods that are linked through status quo bias. The attacker has to decide whether to attempt an attack on the status quo already in the first period or whether to wait. We identify how the attacker’s behavior in the dynamic model differs from that in a comparable static model. Two antagonistic effects are the “option value effect” that is similar to the real option effect in the theory of investment decisions under uncertainty; and a “defender discouragement effect” that often makes change cheaper to achieve than in a comparable static model.