Dorsch, Michael and Dunz, Karl and Maarek, Paul (2012): Asymmetric Information and Inefficient Regulation of Firms Under the Threat of Revolution.
Download (335kB) | Preview
This paper considers the role of asymmetric information in a political agency theory of autocratic economic policy making. Within the context of a static game, we analyze the strategic interaction between an elite ruling class that sets policy and an imperfectly informed disenfranchised class, who may choose to revolt. We identify the Perfect Bayesian Equilibrium (PBE), which need not be pure strategies. We enrich the basic model in an extension that includes two-sided uncertainty and introduces an additional constraint on the elite's policy decision. The extended model features pure strategies in the PBE, which can include inefficient policy choices and revolution. We char- acterize the equilibrium strategies in terms of the economy's level of development.
|Item Type:||MPRA Paper|
|Original Title:||Asymmetric Information and Inefficient Regulation of Firms Under the Threat of Revolution|
|Keywords:||Political transition, Revolution, Asymmetric information, Perfect Bayesian equilibrium|
|Subjects:||D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice ; Clubs ; Committees ; Associations
D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions
P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy ; Legal Institutions ; Property Rights ; Natural Resources ; Energy ; Environment ; Regional Studies
|Depositing User:||Paul Maarek|
|Date Deposited:||18. May 2012 14:57|
|Last Modified:||21. Feb 2013 08:57|
Acemoglu, D. (2006a) Modeling inefficient institutions, in Advances in Economic Theory and Econometrics: Proceedings of the 2005 World Congress of the Econometric Society (Eds.) R. Blundell, W. Newey and T. Persson, 34 Cambridge University Press, Cambridge.
Acemoglu, D. (2006b) A simple model of inefficient institutions, Scandinavian Journal of Economics, 108, 515-546.
Acemoglu, D. (2010) Institutions, factor prices and taxation: Virtues of strong states?, American Economic Review, 100, 115-119.
Acemoglu, D. and Robinson, J. (2001) A theory of political transitions, American Economic Review, 91, 938-963.
Acemoglu, D., Ticchi, D. and Vindigni, A. (2010) A theory of military dictatorships, American Economic Journal: Macroeconomics, 2, 1-42.
Barro, R. (1973) The control of politicians: An economic model, Public Choice, 14, 19-42.
Besley, T. (2006) Principled Agents? The Political Economy of Good Government, Oxford University Press, Oxford.
Bueno de Mesquita, E. (2010) Regime change and revolutionary entrepreneurs, American Political Science Review, 104, 446-466.
Coate, S. and Morris, S. (1995) On the form of transfers to special interests, Journal of Political Economy, 103, 1210-1235.
Djankov, S., La Porta, R., Lopez-De-Silanes, F. and Shleifer, A. (2002) The regulation of entry, Quarterly Journal of Economics, 117, 1-37.
Dorsch, M. and Maarek, P. (2012) Inefficient predation, information, and contagious institutional change, Universite de Cergy-Pontoise Working Paper
Ellis, C. and Fender, J. (2010) Information cascades and revolutionary regime transitions, Economic Journal, 121, 763-792.
Ferejohn, J. (1986) Incumbent performance and electoral control, Public Choice, 50, 5-25.
Grossman, H. (1991) A general equilibrium model of insurrections, American Economic Review, 81, 912-921.
Kuran, T. (1989) Sparks and prairie fires: A theory of unanticipated political revolution, Public Choice, 61, 41-74.
La Porta, R. and Schliefer, A. (2008) The unofficial economy and economic development, Brookings Papers on Economic Activity, 9, 275-352.
Lohmann, S. (1994) Information aggregation through costly political action, American Economic Review, 84, 518-530.
Persson, T. and Tabellini, G. (2000) Political economics: explaining economic policy, MIT Press, Cambridge, MA.
Rauch, J. (1991) Modeling the informal sector formally, Journal of Development Economics, 35, 33-47.