A political argument for inefficiency under severe political pressure

Research output: Contribution to journalArticlepeer-review

Abstract

Who watches the watchmen? In order to examine the role of the governance separation of powers principle in economics, we developed a theoretical model of a structurally failed market with and without political pressure. We conclude that if the executive branch is dedicated to its public duty, then the enforcement of a differential price policy yields an efficient resource allocation. However, if the executive branch attempts to balance its public duty against its personal interests, then the legislative and judicial branches should compel the executive branch to enforce a uniform price policy (seemingly an inefficient allocation, but one that ultimately reduces the public welfare loss) in order to safeguard the public's interests.

Original languageEnglish
Article number100093
JournalJournal of Government and Economics
Volume12
DOIs
StatePublished - 1 Dec 2023
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2023 The Author(s)

Keywords

  • First-price menu auction
  • Free-riding
  • Political economy
  • Protection for sale
  • Regulatory policy
  • Separation of powers principle

ASJC Scopus subject areas

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

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