Dynamic Government Performance: Honeymoons and Crises of Confidence
AbstractWe model the interplay between a government's performance, its expected lifetime, and the confidence it enjoys. Here, "confidence"�can be broadly interpreted as the government's popularity, the size of its parliamentary majority, its reserve of talent, or other factors.�Confidence evolves in response to performance, and if it evaporates then the government falls. We analyze how confidence influences ministers' behavior. A minister's tenure is determined by the performance of both himself and others. He chooses higher performance when the government is expected to last, which is so when others perform well. Multiple equilibria arise: in an optimistic equilibrium, high performance sustains a government indefinitely; in a pessimistic equilibrium, the government's expected demise is a self-fulfilling prophecy. When confidence evolves stochastically, however, there is a unique equilibrium in which a crisis of confidence begins if and only if negative shocks shift confidence below a critical threshold.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 500.
Date of creation: 01 Aug 2010
Date of revision:
Government performance; Coordination game; Equilibrium selection;
Find related papers by JEL classification:
- D2 - Microeconomics - - Production and Organizations
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-03 (All new papers)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise).
If references are entirely missing, you can add them using this form.