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Leadership in Public Good Provision: A Timing Game Perspective

Authors


  • Hubert Kempf, Centre d’Economie de la Sorbonne, Université Paris-1 Panthéon-Sorbonne, 65 boulevard de l’Hôpital, 75013 Paris, France (hubert.kempf@univ-paris1.fr). Grégoire Rota Graziosi, 65 boulevard François Mitterrand, 63000 Clermont-Ferrand, France (gregoire.rota_graziosi@u-clermont1.fr).

  • Grégoire Rota-Graziosi thanks the research program “Gouvernance internationale, universalisme et relativisme des règles et institutions” (Université d’Auvergne) for providing financial support for this research. We are very grateful to Emmanuelle Taugourdeau and Cuong Le Van for comments on earlier drafts, and to participants to seminars at Banque de France, Laval University (Québec, Canada) and the symposium on Leadership and Altruism.

Abstract

We address in this paper the issue of leadership when two governments provide public goods to their constituencies with cross-border externalities as both public goods are valued by consumers in both countries. We study a timing game between two different countries: before providing public goods, the two policymakers non-cooperatively decide their preferred sequence of moves. We establish conditions under which a first- or second-mover advantage emerges for each country, highlighting the role of spillovers and the complementarity or substitutability of public goods. As a result, we are able to prove that there is no leader when, for both countries, public goods are substitutable. When public goods are complements for both countries, each of them may emerge as the leader in the game. Hence a coordination issue arises. We use the notion of risk-dominance to select the leading government. Finally, in the mixed case, the government for whom public goods are substitutable becomes the leader.

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