Understanding Development by Swapnendu Banerjee Vivekananda Mukherjee & Sushil Kumar Haldar

Author:Swapnendu Banerjee, Vivekananda Mukherjee & Sushil Kumar Haldar
Language: eng
Format: epub
Publisher: Springer India, New Delhi

9.5 The Analysis

We analyze this game using backwards induction. We shall focus on the case where project allocation is done by the government based on the criterion of social welfare. However, the government department which may be charged with running the project, has a narrower objective, of maximising its own utility (to be specified shortly).

For ease of exposition, we assume that irrespective of the institutional organization of the project, the whole of the monetised value of the consumers’ surplus is extracted and accrues to the the organization implementing the project. While this is a serious assumption, especially if the project is run by either the government department, or the PPP, we feel that the analysis should qualitatively go through in a more realistic scenario.

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