Budgets Under Delegation

Kimiko Terai () and Amihai Glazer ()
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Kimiko Terai: Keio University
Amihai Glazer: University of California, Irvine

Chapter Chapter 7 in The Political Economy of Fiscal Consolidation in Japan, 2015, pp 167-192 from Springer

Abstract: Abstract Consider a principal who sets a budget that the agent allocates among different services. Because the preferences of the agent may differ from those of the principal, the budget the principal sets can be lower or higher than in the first-best solution. When the principal is uncertain about the agent’s preferences, the agent may choose an allocation that signals his type, thereby affecting the size of the budget the principal will set in the following period. The equilibrium may have separation or pooling. In a pooling equilibrium, the agent may mis-represent his preferences, aiming to get a large budget in the future period.

Keywords: Budget process; Delegation; Signaling (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/978-4-431-55127-0_7

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