This project renews support for research on regulation, procurement contracting, and political economy. The common theme among these three subjects is the interactions between public agencies and institutions and private sector organizations. The normative objective of the proposed research is to characterize the efficiency of regulatory and public policies in settings characterized by incomplete information, limited observability, and imperfect verifiability. The positive objective is to explain the choice of regulatory policies, government procurement programs, public expenditure programs, and other public policies. A satisfactory explanation must bring together political preferences, features of the public institutions that govern the choice and design of policies and programs, and the interests of the private parties affected by such policies. The specific substantive issues addressed are: 1) the economics of regulation with an emphasis on multiparty models and on multiperiod regulatory policies that are subject to evasion by political institutions, 2) government procurement programs that are subject to year-by-year appropriations and annual policy review, and 3) the political economy of government regulatory and expenditure programs. The approach to be taken in this study is based on game theory, microeconomics, and positive political science. Although most economic behavior is shaped by public policies and institutions, these policies and institutions are typically modeled as exogenous, resulting in predictions that are either incomplete or are inconsistent with the subsequent policies adopted by public institutions. A major contribution of this project is to incorporate political behavior into economic analysis by treating both as endogenous.
