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Leadership in Public Good Provision: A Timing Game Perspective

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  • HUBERT KEMPF
  • GRÉGOIRE ROTA GRAZIOSI

Abstract

We address in this paper the issue of leadership when two governments provide public goods to their constituencies with cross-border externalities as both public goods are valued by consumers in both countries. We study a timing game between two different countries: before providing public goods, the two policymakers non-cooperatively decide their preferred sequence of moves. We establish conditions under which a first- or second-mover advantage emerges for each country, highlighting the role of spillovers and the complementarity or substitutability of public goods. As a result, we are able to prove that there is no leader when, for both countries, public goods are substitutable. When public goods are complements for both countries, each of them may emerge as the leader in the game. Hence a coordination issue arises. We use the notion of risk-dominance to select the leading government. Finally, in the mixed case, the government for whom public goods are substitutable becomes the leader. Copyright � 2010 Wiley Periodicals, Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 12 (2010)
Issue (Month): 4 (08)
Pages: 763-787

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Handle: RePEc:bla:jpbect:v:12:y:2010:i:4:p:763-787

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  1. Eric van Damme & Sjaak Hurkens, 1996. "Endogenous Stackelberg leadership," Economics Working Papers 190, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Bloch, Francis & Zenginobuz, Unal, 2004. "The Effect of Spillovers on the Provision of Local Public Goods," MPRA Paper 186, University Library of Munich, Germany, revised 05 Oct 2006.
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Cited by:
  1. Hoffmann, Magnus & Rota-Graziosi, Grégoire, 2012. "Endogenous timing in general rent-seeking and conflict models," Games and Economic Behavior, Elsevier, vol. 75(1), pages 168-184.
  2. Kempf, Hubert & Rota-Graziosi, Grégoire, 2010. "Endogenizing leadership in tax competition," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 768-776, October.
  3. Hattori, Keisuke & Kitamura, Takahiro, 2011. "Endogenous Timing in Strategic Environmental Policymaking," MPRA Paper 29337, University Library of Munich, Germany.

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