Fiscal Federalism and Competitive Bidding for Foreign Investment as a Multistage Game
AbstractThis paper models the behavior of states in a federal country wising to attract foreign firms to locate within their own individual jurisdictions. The essential intertemporal character of this decision is modeled as a multi-stage game to attract such foreign investment in these states. It is found that, when states with unequal political or economic infrastructure compete, the resulting Nash equilibrium profiles are inefficient. Under certain conditions, states that have won once, can â€œallowâ€ a rival to win in a subsequent stage. The resulting Nash Equilibrium is more efficient. If the option of â€œallowingâ€ a rival to win is not available, then states may resort to â€œsuicideâ€ strategies defined as outcomes created by history of losses.
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Bibliographic InfoPaper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2013-04.
Length: 35 pages
Date of creation: 2013
Date of revision:
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Fiscal Federalism; Multi stage games; suicide strategies.;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-27 (All new papers)
- NEP-GTH-2013-04-27 (Game Theory)
- NEP-PBE-2013-04-27 (Public Economics)
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