The decentralization of public services : lessons from the theory of the firm

The literature on the theory of the firm is rich in theoretical and practical insights. The key messages in this overview are the following: (a) the modern theory of the firm provides many insights into political organization, for political jurisdictions can be viewed as pseudo-firms that provide services and that group together various kinds of decisionmaking activities. (b) questions about decentralization in government are questions about the allocation of control rights. If contractual relation were complete, it would not matter whether power were decentralized, as contracts would specify everything to be done at each level of government. There would be no need for discretion; (c) how much to decentralize depends on which level of government will have the most incentive to bring about desired outcomes. Centralized governments may be better at coordinating things but tend to be less accountable than decentralized governments (with important expections); and (d) the organizational design of government affects not only incentives to make decisions but also incentives to gather the information on which those decisions are based.Knowledge Economy,Environmental Economics&Policies,National Governance,Banks&Banking Reform,Education for the Knowledge Economy

Welfare and Pricing of Mail in a Communications Market

We build a model where a postal incumbent offering single piece, transactional and advertising mail competes with postal entrants and with a firm offering an alternative medium. We solve for the optimal prices under various competition assumptions. We calibrate the model and provide numerical simulations in order to shed light on the impact of these assumptions on volumes and welfare levels.

Competition Between Mail and Electronic Substitutes in the Financial Sector: A Hotelling Approach

We build a model where two banks compete for the patronage of consumers by offering them, among other services and products, two forms of transactional media: paper statements and electronic substitutes. Both banks and both products are horizontally differentiated and modeled à la Hotelling(1929). Assuming symmetry of consumer preferences (over banks and, independently, over the two transactional media) and of banks's costs, we obtain that the unique profit-maximizing symmetrical prices reflect both the transactional media marginal costs and the intensity of competition between banks. Most notably, the intensity of consumers preferences for one variant of transactional medium over another has no influence on the profit-maximizing media prices. Also, there is total pass-through of increases in input prices (such as mail price for paper statements) into prices paid by final consumers