Leadership in Public Good Provision: a Timing Game Perspective
AbstractWe 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 strategic 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, both countries 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. Lastly, in the mixed case, the government for whom public goods are substitutable becomes the leader.
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Date of creation: 18 Jan 2011
Date of revision:
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public good; Spillovers; Subgame Perfect Equilibrium; Strategic Complements; Stackelberg; Pareto Dominance; Risk Dominance;
Other versions of this item:
- Hubert Kempf & Grégoire Rota Graziosi, 2010. "Leadership in Public Good Provision: A Timing Game Perspective," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(4), pages 763-787, 08.
- Kempf, H. & Rota Graziosi, G., 2009. "Leadership in Public Good Provision: a Timing Game Perspective," Working papers 240, Banque de France.
- Grégoire ROTA-GRAZIOSI & Hubert KEMPF, 2008. "Leadership in Public Good Provision: a Timing Game Perspective," Working Papers 200817, CERDI.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-CBE-2011-01-30 (Cognitive & Behavioural Economics)
- NEP-PBE-2011-01-30 (Public Economics)
- NEP-PUB-2011-01-30 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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