Exploring the Sub-State Intergovernmental Game

26 Pages Posted: 20 Apr 2020 Last revised: 23 Apr 2020

See all articles by Spencer Brien

Spencer Brien

Naval Postgraduate School - Graduate School of Defense Management

Robert Eger

Government of the United States of America - Graduate School of Business and Public Policy

Date Written: March 27, 2020

Abstract

Cooperative budgeting arrangements between state and local governments jointly fund local programs. The mix of state and local revenues contributed to these arrangements can change as budget priorities shift over time. This study examines the strategic choices public officials make as they determine their contributions to jointly-funded programs. Using a game theory model known as the “Diner’s Dilemma”, the analysis explores how each level of government considers how much revenue to contribute and whether it can induce its partner to increase their level of support. This analysis applies primarily to local programs with regional externalities. The model illustrates how local efforts to aggressively try to shift costs to the state government can backfire, particularly during periods of state fiscal stress.

Keywords: Fiscal Federalism, Game Theory, Intergovernmental Revenue, Collaborative Budgeting

JEL Classification: H40, H54, H72, D03

Suggested Citation

Brien, Spencer and Eger, Robert, Exploring the Sub-State Intergovernmental Game (March 27, 2020). Available at SSRN: https://ssrn.com/abstract=3562735 or http://dx.doi.org/10.2139/ssrn.3562735

Spencer Brien (Contact Author)

Naval Postgraduate School - Graduate School of Defense Management ( email )

555 Dyer Road
Monterey, CA 93943
United States

Robert Eger

Government of the United States of America - Graduate School of Business and Public Policy ( email )

555 Dyer Road
Monterey, CA 93943
United States
831-656-7625 (Phone)

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