One-sided provision of a public good through bargaining under representative democracy

ABSTRACT

We examine a trade-off between strategic delegation and the internalization of interregional externalities through bargaining in the context of political economy. We show that in the case of one-sided provision of a public good, if the public good produced by one region generates a sufficiently significant spillover to another region, then interregional negotiation increases the total surplus of the entire economy.

KEYWORDS:

• Public goods
• Nash bargaining
• strategic delegation
• spillover

JEL CLASSIFICATION:

• D62
• D72
• H41
• H77

Acknowledgements

This is a substantially revised version of Shinohara (2016). I am grateful to an anonymous referee. I also thank Wataru Kobayashi, Tomomi Miyazaki, and Kazuki Hiraga for helpful comments. I gratefully acknowledge financial support from JSPS KAKENHI Grand-in-Aid for Scientific Research JP15H03349 and JP15K03361.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ The proofs of all results are available upon request or see the corresponding parts in Shinohara (2016).

² Note that since , the relative relationship between the total surplus of the economy with negotiation and that without negotiation is equivalent to the relationship between and .

Additional information

Funding

This work was supported by the Japan Society for the Promotion of Science [JP15H03349,JP15K03361].