Policy Entrepreneurship with Asymmetric Competition

38 Pages Posted: 21 Feb 2013 Last revised: 11 Oct 2015

Date Written: October 9, 2015

Abstract

In political environments, the process of developing new policies often involves competing factions or entrepreneurs, who make productive investments to make their proposals more appealing to decisionmakers. The ideologies and abilities of these factions is often highly asymmetric, e.g., competition over industrial policy between interest groups and consumer advocacy organizations. In this paper we extend the competitive policy development model of Hirsch and Shotts (2015) to understand productive policy competition between asymmetric entrepreneurs, and analyze how entrepreneurs' extremism and costs of crafting high-quality proposals affect patterns of competition and policy outcomes. We show that with arbitrary asymmetries the model exhibits a unique equilibrium, and analytically characterize equilibrium strategies, outcomes, and payoffs. We also show that a more ideologically extreme or more skilled entrepreneur is more likely to develop a policy, develops more extreme policies, and is more likely to win. Nevertheless, she also provides greater benefits to the decisionmaker once her proposals' endogenously-chosen quality is accounted for. Finally, when the entrepreneurs are highly asymmetric, one entrepreneur almost always wins, but the decisionmaker nevertheless benefits from the potential for competition.

JEL Classification: D72, D78, D44

Suggested Citation

Hirsch, Alexander V., Policy Entrepreneurship with Asymmetric Competition (October 9, 2015). Available at SSRN: https://ssrn.com/abstract=2221682 or http://dx.doi.org/10.2139/ssrn.2221682

Alexander V. Hirsch (Contact Author)

California Institute of Technology ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

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