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Endogenous Institutions in Bureaucratic Compliance Games

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Author Info
Michele Santoni ()
Silvia Fedeli ()

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Abstract

We consider a set-up where two governments have either conflicting or matching preferences on the provision of differentiated (local) goods supplied by a common monopoly bureau. We develop a two-stage game. At stage-1, the two governments decide whether or not to merge into a single institution. At stage-2, all players simultaneously and independently take their decisions in terms of production and rents, with perfect knowledge of the other players' strategies. We solve the subgame perfect Nash equilibrium of this game, and show that, if the bureau immediately updatesits objective function to institutional changes, then the governments always prefer merging. However, if there is an initial bureaucratic inertia in adjusting the bureau's objective function to the institutional change, then ruling politicians may prefer decentralisation to centralisation, depending on the strategic properties of the compliance game and on their own discounting.

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Paper provided by Department of Economics University of Milan Italy in its series Departemental Working Papers with number 2000-03.

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Date of creation: 01 Jan 2000
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Handle: RePEc:mil:wpdepa:2000-03

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Related research
Keywords: Bureaucracy; Common agency; Repeated compliance games;

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Find related papers by JEL classification:
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

References listed on IDEAS
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.:

  1. Fedeli, Silvia, 1999. " Competing Bureaus and Politicians: A Compliance Approach to the Diversion of Public Funds," Public Choice, Springer, vol. 100(3-4), pages 253-70, September. [Downloadable!] (restricted)
  2. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn. [Downloadable!] (restricted)
    Other versions:
  3. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter. [Downloadable!] (restricted)
  4. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July. [Downloadable!] (restricted)
  5. Carlsen, Fredrik & Haugen, Kjetil, 1994. " Markov Perfect Equilibrium in Multi-period Games between Sponsor and Bureau," Public Choice, Springer, vol. 79(3-4), pages 257-80, June.
  6. Breton, Albert & Wintrobe, Ronald, 1975. "The Equilibrium Size of a Budget-maximizing Bureau: A Note on Niskanen's Theory of Bureaucracy," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 195-207, February. [Downloadable!] (restricted)
  7. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring. [Downloadable!] (restricted)
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  8. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-97, June. [Downloadable!] (restricted)
  9. Moene, Karl O., 1986. "Types of bureaucratic interaction," Journal of Public Economics, Elsevier, vol. 29(3), pages 333-345, April. [Downloadable!] (restricted)
  10. Buchanan, James M & Lee, Dwight R, 1982. "Politics, Time, and the Laffer Curve," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 816-19, August. [Downloadable!] (restricted)
  11. Barbara Spencer, 1979. "Outside Information and the Degree of Monopoly Power of a Public Bureau," Working Papers 361, Queen's University, Department of Economics.
  12. Niskanen, William A, 1975. "Bureaucrats and Politicians," Journal of Law & Economics, University of Chicago Press, vol. 18(3), pages 617-43, December.
  13. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November. [Downloadable!] (restricted)
  14. Shleifer, Andrei & Vishny, Robert W, 1993. "Corruption," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 599-617, August. [Downloadable!] (restricted)
    Other versions:
    • Andrei Shleifer & Robert W. Vishny, 1993. "Corruption," NBER Working Papers 4372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Chan, Kenneth S. & Mestelman, Stuart, 1988. "Institutions, efficiency and the strategic behaviour of sponsors and bureaus," Journal of Public Economics, Elsevier, vol. 37(1), pages 91-102, October. [Downloadable!] (restricted)
  16. Besley, Timothy & Coate, Stephen, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 85-114, February.
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  17. Malcomson, James M., 1986. "Some analytics of the laffer curve," Journal of Public Economics, Elsevier, vol. 29(3), pages 263-279, April. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Silvia Fedeli & Michele Santoni, 2006. "The Government's Choice of Bureaucratic Organisation: An Application to Italian State Museums," Journal of Cultural Economics, Springer, vol. 30(1), pages 41-72, March. [Downloadable!] (restricted)
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