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How to Win a Decision in a Confederation

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  • Thisse, Jacques-François
  • Jehiel, Philippe

Abstract

This Paper deals with collective decision making within a group of independent jurisdictions. The right to choose the public policy is delegated from the central authority of one of the jurisdictions through a bidding procedure among the group members. We identify the following trade-off: competition among jurisdictions yields higher transfers to the government, but the outcome tends to be less efficient than what it is when jurisdictions negotiate prior to the decision-making process. We extend and illustrate the model by means of a public good game involving several heterogeneous jurisdictions.

Suggested Citation

  • Thisse, Jacques-François & Jehiel, Philippe, 2002. "How to Win a Decision in a Confederation," CEPR Discussion Papers 3465, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3465
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    1. Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-1335, November.
    2. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    3. Jehiel, Phillippe, 1997. "Bargaining between benevolent jurisdictions or when delegation induces inefficiencies," Journal of Public Economics, Elsevier, vol. 65(1), pages 61-74, July.
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    6. Wildasin, David E., 1988. "Nash equilibria in models of fiscal competition," Journal of Public Economics, Elsevier, vol. 35(2), pages 229-240, March.
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    9. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 269-304, June.
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    12. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
    13. J. Vernon Henderson & Jacques-Francois Thisse, 2001. "On Strategic Community Development," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 546-569, June.
    14. Alan Williams, 1966. "The Optimal Provision of Public Goods in a System of Local Government," Journal of Political Economy, University of Chicago Press, vol. 74(1), pages 18-33.
    15. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
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    Cited by:

    1. Helmut Bester, 2009. "Externalities, communication and the allocation of decision rights," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(2), pages 269-296, November.
    2. Klaus Abbink & Jordi Brandts, 2016. "Political autonomy and independence: Theory and experimental evidence," Journal of Theoretical Politics, , vol. 28(3), pages 461-496, July.

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    More about this item

    Keywords

    Jurisdictions; Confederation; Auction; Spillovers; Public good;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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