DP3465 How to Win a Decision in a Confederation

Author(s): Philippe Jehiel, Jacques-François Thisse
Publication Date: July 2002
Keyword(s): auction, confederation, jurisdictions, public good, spillovers
JEL(s): D44, D62, H41, H70
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3465

This Paper deals with collective decision making within a group of independent jurisdictions. The right to choose the public policy is delegated from the central authority of one of the jurisdictions through a bidding procedure among the group members. We identify the following trade-off: competition among jurisdictions yields higher transfers to the government, but the outcome tends to be less efficient than what it is when jurisdictions negotiate prior to the decision-making process. We extend and illustrate the model by means of a public good game involving several heterogeneous jurisdictions.