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Useless Prevention vs. Costly Remediation

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  • Forand, Jean Guillaume

Abstract

I model the dynamic agency relationship underlying prevention. In each period, a principal sets a budget for an agent that has private information about a problem, which the agent can direct to solving the problem or divert into rents. Problems are persistent and rectifiable: they randomly generate observable disasters until enough resources have been committed to solving them. I characterise the principal's equilibrium trade-off between (a) preventing disasters while squandering transfers in informational rents to agents facing trivial problems and (b) limiting transfers and remediating costly disasters that eliminate agents informational advantage and prove the need for action.

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  • Forand, Jean Guillaume, 2015. "Useless Prevention vs. Costly Remediation," Quarterly Journal of Political Science, now publishers, vol. 10(2), pages 187-220, June.
    • Handle: RePEc:now:jlqjps:100.00014068
    DOI: 10.1561/100.00014068
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    1. Kishishita, Daiki & Yamagishi, Atsushi, 2021. "Contagion of populist extremism," Journal of Public Economics, Elsevier, vol. 193(C).

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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