Creating Confusion · All figures

Figure 1. Unique equilibrium.

There is a unique equilibrium, that is, a unique pair \(k^*,\delta^*\) simultaneously satisfying the citizens’ best response \(k(\delta)\) and the politician’s best response \(\delta(k)\). For \(\alpha>1\) there is a critical point \(\hat{\delta}(\alpha)\) such that the citizens’ \(k(\delta)\) is increasing in \(\delta\) for \(\delta<\hat{\delta}(\alpha)\). For \(c>1\) there is a critical point \(\hat{k}(c)\) such that the politician’s \(\delta(k)\) is decreasing in \(k\) for \(k>\hat{k}(c)\). Note that if \(c<1\) then \(k^*\leq c\) and hence \(k^*\) cannot be high if \(c\) is low.

Figure 1. Unique equilibrium.