Federal constitutions are viewed as incomplete contracts that must be renegotiated among self-interested, reelection-seeking politicians. Even when collectively sub-optimal, they are difficult to renegotiate if each state government faces electoral incentives to ignore externalities and federation-wide collective goods. Vertically integrated political parties help resolve this problem by creati...

Law enforcement is decentralized. It is so despite documented interjurisdictional externalities which would justify its centralization. To explain this fact, we construct a political economy model of law enforcement. Under decentralization, law enforcement in each region is in accord with the preferences of regional citizens, but interjurisdictional externalities are neglected. Under centraliza...

In collective decision making bilateral deals can increase or decrease the likelihood of finding compromises, depending on whether such deals have externalities. Positive externalities mean third actors profit from bilateral deals, whereas negative externalities mean bilateral deals hurt third actors. We develop the first model of collective decision making that takes externalities into account...

This paper studies bargaining between a seller and multiple buyers with externalities. A full characterization of the stationary subgame perfect equilibria in generic games is presented. Equilibria exist for generic parameter values, with delay only for strong positive externalities. The outcome is efficient if externalities are not too positive. Increasing the bargaining power of the seller de...

Professor Danielsson (this journal 2000) argues that congestion externalities are solved if individual transferable quotas (ITQs) are introduced. This is in direct contrast to my own research (Boyce 1992, Corollary 1, p. 399). Danielsson raises an interesting question about how congestion externalities should be modeled. However, I argue that my own result is fundamentally correct, based on the...

We study truthful mechanisms in the context of cake cutting when agents not only value their own pieces of cake but also care for the pieces assigned to other agents. In particular, agents derive benefits or costs from the pieces of cake assigned to other agents. This phenomenon is often referred to as positive or negative externalities. We propose and study the following model: given an alloca...