Applying game theory to the protection of public funds: Some introductory notes

Forte, Francesco; Powers, Charles H.

doi:10.1007/bf01552470

Cited by 5 publications

(6 citation statements)

References 5 publications

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“…We borrow from the standard approach to the economic theory of bureaucracy discussed by the traditional Public Choice literature ( [6][7][8][9][10][11][12][13][14][15][16][17]) when governments deal with either competing or cooperating bureaus ( [18][19][20]). One of the main propositions from the Public Choice literature is addressed to controlling politicians and bureaus so as to prevent the waste of public resources by allowing for a reduction of the bureaus' discretionary profits and the government's political rents.…”

Section: Literature Reviewmentioning

confidence: 99%

Public Provision of Goods and Services under Cost Uncertainty: The Government’s Bureaucratic Organization

2021

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The digital transition is a challenge that developed countries are currently facing. The transition process is associated with different degrees of uncertainty, which are particularly relevant for changes that have to do with the provision of goods and services produced by public administrations. Our paper uses a partial equilibrium model to study the effects of uncertainty on the public provision of goods and services produced by bureaucratic agencies, including the incentive of the government to consolidate production. We assume that bureaucratic agencies may play either a cooperative game with each other and a non-cooperative game against the government (i.e., a consolidated bureaucracy) or a non-cooperative game with each other and against the government (i.e., competing bureaus). Both the government and the bureaus face tradeoffs between maximizing the electorate preferences and extracting some political and/or bureaucratic rents. We find that a cooperative (competitive) bureaucratic solution depends on the nature of the goods produced. We find that costs’ uncertainty affects the level of public production and the way the policymakers extract their rents.

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Section: Literature Reviewmentioning

confidence: 99%

Public Provision of Goods and Services under Cost Uncertainty: The Government’s Bureaucratic Organization

2021

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“…We borrow from both the standard approach, the economic theory of bureaucracies (see, among others, [1,5,6,30]) and from the public choice literature's insight that a proper designing of the organizational form of bureaucratic supply [32][33][34][35][36][37][38] can, in turn, increase bureaucratic efficiency. To study the relation between an incumbent government and n bureaus, we extend the methods in [22] and specify the government's' preferences for bureaucratic output as a quadratic utility function, which is assumed to represent the electorate wishes (cf.…”

Section: The Modelmentioning

confidence: 99%

“…Moreover, we evaluate, ceteris paribus, the effects of bureaucratic reshuffling from the point of view of society, assumed to prefer those policies that approximate social efficiency by minimising bureaucratic and political rents.Mathematics 2019, 7, 998 2 of 12 of further agents only controlling and dispensing resources might be costly and one could weigh the extent to which control costs induce benefits from waste reduction (see [5]). Moreover, the introduction of control agents whose aim is to safeguard public funds would reduce the diversion of public funds for discretionary purposes, unless such agents pursue interests of their own, so that the increased number of players results in an increased number of resources' claimants instead of increased benefits to the electorate [6].The starting point of this paper is different because (i) what it is observed in reality is substantially different from the 1 government-1 bureau relationships depicted by the standard literature. Seeking examples fitting to the original Niskanean-type bureaucracy, we can barely find spatial activities of NASA in the U.S. and conclude that it is almost always the case that the government deals with more than one bureau for the public supply of goods and services or that a common bureau supplies more than one good to different levels of government as in [7].…”

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confidence: 99%

“…Mathematics 2019, 7, 998 2 of 12 of further agents only controlling and dispensing resources might be costly and one could weigh the extent to which control costs induce benefits from waste reduction (see [5]). Moreover, the introduction of control agents whose aim is to safeguard public funds would reduce the diversion of public funds for discretionary purposes, unless such agents pursue interests of their own, so that the increased number of players results in an increased number of resources' claimants instead of increased benefits to the electorate [6].…”

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confidence: 99%

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Bureaucratic Reshuffling and Efficiency: Do n-Competing Bureaus Determine Inefficient Results?

2019

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Governments often support their preferences for decentralised (centralised) bureaucracies on the grounds of efficiency considerations (production side). Here, we consider the demand side, i.e., whether the government perception of citizens’ demand for differentiated goods/services might increase efficiency by simply reshuffling bureaucratic production activities. We represent the budgetary process—between an incumbent governing party and n-competing bureaus producing differentiated goods/services—as a simultaneous Nash-compliance game with complete information. On these grounds, we analyse—in terms of public production, players’ rents and payoffs—the effects of increasing competition (as for the number of bureaus) in the political–bureaucratic market. Moreover, we evaluate, ceteris paribus, the effects of bureaucratic reshuffling from the point of view of society, assumed to prefer those policies that approximate social efficiency by minimising bureaucratic and political rents.

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“…Borrowing both from the standard approach to the economic theory of bureaucracies (see, among others, Niskanen 1971;Migué and Bélanger 1974;Wintrobe 1975, 1982;Forte and Powers 1994), and from the public choice literature's insight that politicians can increase bureaucratic efficiency by properly designing the organizational form of bureaucratic supply (Moe 1984(Moe , 2012Bagnoli and McKee 1991;Ting 2002;Janssen et al 2003;Bates and Santerre 2008;Bates et al 2011), and from Horn and Wolinsky (1988), who develop the idea that consolidation depends on the extent of input substitutability, this section extends Fedeli and Santoni (2006) to the case of demand uncertainty. Consider a regional government willing to offer bureaucratic output (e.g., healthcare services).…”

Section: The Modelmentioning

confidence: 99%

Bureaucratic institutional design: the case of the Italian NHS

2018

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We propose a model where a regional government's choice of the number of bureaucratic agencies operating in a region depends upon the degree of substitutability and complementarity of the bureaucratic services being demanded. We show that, if the government perceives the citizens' demand as a demand for substitutable services, it will choose provision by two independent agencies. If the government perceives the citizens' demand as a demand for complementary services, it will choose provision by a single consolidated agency. Exogenous shocks to the number of citizens amplify these incentives. Evidence from the Italian National Health Service (NHS) supports this hypothesis. Results show a positive effect of proxies of substitutable services on the number of regional local health authorities and a negative effect of proxies of complementary services. The major immigration amnesties, taken as shocks to the number of citizens entitled to the service, magnify these effects.Keywords Bureaucratic institutional design · Public local health authorities · Consolidation and decentralization of local health authorities · Italian NHS JEL Classification D73 · H75 · I18 · L32 Would you say it is normal to have regions with 7 provinces and 22 Local Health Authorities? […] In my opinion, the idea of regions with 7 provinces and 22LHAs is an aberration. So if in agreement with the regions, since this task falls within their responsibilities, we can at last cut the number of managerial positions in the LHAs and apply 'standard costs' throughout, so that the proverbial needle has to cost the same in Calabria as in Lombardy, I would say this is a good thing. (Matteo Renzi, Italian PM, 10th April 2015, http://www.gover no.it/ media /consi glio-dei-minis tri-n58/619, 5:25-6:20; our translation)

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Applying game theory to the protection of public funds: Some introductory notes

Cited by 5 publications

References 5 publications

Public Provision of Goods and Services under Cost Uncertainty: The Government’s Bureaucratic Organization

Public Provision of Goods and Services under Cost Uncertainty: The Government’s Bureaucratic Organization

Bureaucratic Reshuffling and Efficiency: Do n-Competing Bureaus Determine Inefficient Results?

Bureaucratic institutional design: the case of the Italian NHS

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