Leadership in Public Good Provision: a Timing Game Perspective
We 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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- van Damme, E.E.C. & Hurkens, J.P.M., 1999.
"Endogenous Stackelberg leadership,"
Other publications TiSEM
83a05fd8-4285-48f3-84ef-3, Tilburg University, School of Economics and Management.
- van Damme, E.E.C. & Hurkens, J.P.M., 1996. "Endogenous Stackelberg Leadership," Discussion Paper 1996-115, Tilburg University, Center for Economic Research.
- Eric van Damme & Sjaak Hurkens, 1996. "Endogenous Stackelberg leadership," Economics Working Papers 190, Department of Economics and Business, Universitat Pompeu Fabra.
- Francis Bloch & Unal Zenginobuz, 2007. "The effect of spillovers on the provision of local public goods," Review of Economic Design, Springer;Society for Economic Design, vol. 11(3), pages 199-216, November.
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