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Endogenous institutions in bureaucratic compliance games

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  • Silvia Fedeli
  • Michele Santoni

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 updates its 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. Copyright Springer-Verlag Berlin Heidelberg 2001

Suggested Citation

  • Silvia Fedeli & Michele Santoni, 2001. "Endogenous institutions in bureaucratic compliance games," Economics of Governance, Springer, vol. 2(3), pages 203-229, November.
    • Handle: RePEc:spr:ecogov:v:2:y:2001:i:3:p:203-229
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    References listed on IDEAS

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    Cited by:

    1. Graham Mallard, 2014. "Static Common Agency And Political Influence: An Evaluative Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 17-35, February.
    2. Silvia Fedeli & Michele Santoni, 2006. "The Government's Choice of Bureaucratic Organisation: An Application to Italian State Museums," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 30(1), pages 41-72, March.

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    More about this item

    Keywords

    Key words: bureaucracy; common agency; repeated compliance games; JEL classification: D73;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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