¿From a theoretical viewpoint, political budget cycles (PBC) arise in equilibrium when rational voters are imperfectly informed about the incumbent's competency and the incumbent enjoys discretionary power over the budget. This paper focuses on the second condition, specifically examining how PBC in the composition of government spending are affected by separation of powers. With an exogenous status quo, the details of the budgetary process, namely, the status quo location, the agenda-setting authority and the degree of compliance with the budgetary law, play critical roles for the existence and the size of PBC. With an endogenous status quo given by the previous period's budget, PBC only arise when there is low compliance with the budgetary law. What drives these results are effective checks and balances, that provide a commitment device to solve the credibility problem behind PBC.JEL Classification: D72, D78.

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This paper provides necessary and sufficient conditions for the existence of a pure strategy Bertrand equilibrium in a model of price competition with fixed costs. It unveils an interesting and unexplored relationship between Bertrand competition and natural monopoly. That relationship points out that the non-subadditivity of the cost function at the output level corresponding to the oligopoly break-even price, denoted by D(pL(n)), is sufficient to guarantee that the market sustains a (not necessarily symmetric) Bertrand equilibrium in pure strategies with two or more firms supplying at least D(pL(n)). Conversely, the existence of a pure strategy equilibrium ensures that the cost function is not subadditive at every output greater than or equal to D(pL(n)).

This paper analyzes the traditional unidimensional, two-party electoral competition game when parties have mixed motivations, in the sense that they are interested in winning the election, but also in the policy implemented after the contest. In spite of having discontinuous payoffs, this game, referred to as the hybrid election game, is shown to be payoff secure and reciprocally upper semi-continuous. Conditional payoffs, however, are not quasi-concave. Hence, the existence of a pure strategy Nash equilibrium ( psne) is ensured only if parties have homogenous interests in power. In that case, an equilibrium not only exists, but it is also unique. Instead, if parties have heterogeneous motivations, depending upon the relationship between the electoral uncertainty, the aggregate opportunism, and its distribution across parties, a psne may or may not exist. The mixed extension, however, is always better reply secure. Therefore, a mixed strategy Nash equilibrium does indeed exist. Copyright � 2008 Wiley Periodicals, Inc..