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Incentives and Political Economy$
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Jean-Jacques Laffont

Print publication date: 2001

Print ISBN-13: 9780199248681

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0199248680.001.0001

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An Incentive Theory of the Separation of Powers

An Incentive Theory of the Separation of Powers

(p.46) 3 An Incentive Theory of the Separation of Powers
Incentives and Political Economy

Jean‐Jacques Laffont (Contributor Webpage)

Oxford University Press

The design of a complete Constitution is further augmented by focusing on the need for separation of powers to avoid regulatory capture. The economic concepts used are yardstick competition and Bayesian Nash behaviour. A number of models using different assumptions regarding separation between politicians and/or regulatory agencies are explored and an equilibrium involving excessive bribery is found to be robust. Additionally, the social costs of side‐contracting are shown to be limited by the separation of powers.

Keywords:   Bayesian Nash equilibrium, bribery, constitutional design, regulatory capture, separation of powers, side‐contracting, social costs, yardstick competition

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