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Repeated Protection for Sale

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  • Chris Y. Tung
  • C. C. Yang

Abstract

This paper addresses whether the efficient equilibria characterized by Grossman and Helpman's one-shot protection-for-sale game are renegotiation-proof in an infinitely repeated setting. We propose a simple strategy profile that can support the efficient, truthful equilibrium in each period as a strongly renegotiation-proof subgame perfect equilibrium. This result provides another plausible reason to explain why the truthful equilibrium may be focal in the game of protection-for-sale. In addition, when the timing of the contributions is specified explicitly, the special interest groups should minimize the upfront payment to the government before policy implementation to reduce the possibility of the collapse of such relational contracts.

Suggested Citation

  • Chris Y. Tung & C. C. Yang, 2014. "Repeated Protection for Sale," Pacific Economic Review, Wiley Blackwell, vol. 19(4), pages 466-482, October.
    • Handle: RePEc:bla:pacecr:v:19:y:2014:i:4:p:466-482
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    File URL: http://hdl.handle.net/10.1111/1468-0106.12074
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    References listed on IDEAS

    as
    1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    2. Campante, Filipe R. & Ferreira, Francisco H.G., 2007. "Inefficient lobbying, populism and oligarchy," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 993-1021, June.
    3. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
    4. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
    5. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(1), pages 1-31.
    6. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
    7. Baliga, Sandeep & Evans, Robert, 2000. "Renegotiation in Repeated Games with Side-Payments," Games and Economic Behavior, Elsevier, vol. 33(2), pages 159-176, November.
    8. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
    9. Akifumi Ishihara, 2017. "Relational Political Contribution under Common Agency," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 527-547, April.
    10. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 265-286.
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