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Sébastien Rouillon edited sectionAppendix__big.tex
over 8 years ago
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\textbf{\textit{Existence of Nash equilibrium with full compensation of damage.}}
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We show that if $\pi\left(0,0\right)=\alpha<1$, then no equilibrium exists when lobby $E$ is fully compensated for damage. Indeed, if fully compensated for damage, $y=0$ is a dominant strategy for lobby $E$. As a result, lobby $I$ chooses $x$ to maximize $\pi\left(x,0\right)\left(b-\min\left(\delta,k\right)\right)-x$. If $\alpha<1$, no equilibrium strategy exists for lobby $I$. Indeed, the strategy $x=0$ is dominated by any strategy $x$ such that $00$, the expected utility is strictly decreasing in $x$. $\blacksquare$