Common Agency and Coordination: General Theory and Application to Government Policy Making

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Common Agency and Coordination: General Theory and Application to Government Policy Making

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Title: Common Agency and Coordination: General Theory and Application to Government Policy Making
Author: Dixit, Avinash; Grossman, Gene M.; Helpman, Elhanan

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Citation: Dixit, Avinash, Gene M. Grossman, and Elhanan Helpman. 1997. Common agency and coordination: General theory and application to government policy making. Journal of Political Economy 105(4): 752-769.
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Abstract: We develop a model of common agency with complete information and general preferences with nontransferable utility, and we prove that the principals' Nash equilibrium in truthful strategies implements an efficient action. We apply this theory to the construction of a positive model of public finance, where organized special interests can lobby the government for consumer and producer taxes or subsidies and targeted lump‐sum taxes or transfers. The lobbies use only the nondistorting transfers in their noncooperative equilibrium, but their intergroup competition for transfers turns into a prisoners' dilemma in which the government captures all the gain that is potentially available to the parties.
Published Version: doi:10.1086/262092
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3450061
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