Competing bureaus and politicians: A compliance approach to the diversion of public funds

This article analyzes the effects of the compliance relationship between the governing party and two competing bureaus producing differentiated goods. We assume that the three players simultaneously and independently take their decision in terms of production and rents with perfect knowledge of each others strategies. Unlike Niskanen's competitive results, which are invariant with respect to the monopoly solution and only depend on the characteristics of the review process, here the budgetary equilibrium changes depending on the nature of the goods supplied by the competing bureaus and is affected both by their demand and cost conditions and by the resources available to the governing party.