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

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  • Giovanni Di Bartolomeo

    (Department of Economics and Law, Sapienza University of Rome, 00161 Rome, Italy)

  • Silvia Fedeli

    (Department of Economics and Law, Sapienza University of Rome, 00161 Rome, Italy)

  • Michele Santoni

    (Dipartimento di Economia, Management e Metodi Quantitativi, Università degli Studi di Milano, 20122 Milan, Italy)

Abstract

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.

Suggested Citation

  • Giovanni Di Bartolomeo & Silvia Fedeli & Michele Santoni, 2021. "Public Provision of Goods and Services under Cost Uncertainty: The Government’s Bureaucratic Organization," Mathematics, MDPI, vol. 10(1), pages 1-13, December.
    • Handle: RePEc:gam:jmathe:v:10:y:2021:i:1:p:77-:d:711786
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    References listed on IDEAS

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    1. Gary Miller, 1977. "Bureaucratic compliance as a game on the unit square," Public Choice, Springer, vol. 29(1), pages 37-51, March.
    2. Reyer van der Vlies, 2020. "Digital strategies in education across OECD countries: Exploring education policies on digital technologies," OECD Education Working Papers 226, OECD Publishing.
    3. Breton, Albert & Wintrobe, Ronald, 1975. "The Equilibrium Size of a Budget-maximizing Bureau: A Note on Niskanen's Theory of Bureaucracy," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 195-207, February.
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