Date Added: Jan 2011
The authors address in this paper the issue of leadership when two governments provide public goods to their constituencies with cross border externalities as both public goods are valued by consumers in both countries. They study a timing game between two different countries: before providing public goods, the two policymakers non-cooperatively decide their preferred sequence of moves. They establish conditions under which a first- or second-mover advantage emerges for each country, highlighting the role of spillovers and the strategic complementarily or substitutability of public goods. As a result they are able to prove that there is no leader when, for both countries, public goods are substitutable.