@article{TEXTUAL,
      recid = {9256},
      author = {Austen-Smith, David and Dziuda, Wioletta and Harstad, Bård  and Loeper, Antoine},
      title = {Gridlock and inefficient policy instruments},
      journal = {Theoretical Economics},
      address = {2019-05-06},
      number = {TEXTUAL},
      abstract = {Why do rational politicians choose inefficient policy  instruments? Environmental regulation, for example, often  takes the form of technology standards and quotas even when  cost-effective Pigou taxes are available. To shed light on  this puzzle, we present a stochastic game with multiple  legislative veto players and show that inefficient policy  instruments are politically easier than efficient  instruments to repeal. Anticipating this, heterogeneous  legislators agree more readily on an inefficient policy  instrument. We describe when inefficient instruments are  likely to be chosen, and predict that they are used more  frequently in (moderately) polarized political environments  and in volatile economic environments. We show conditions  under which players strictly benefit from the availability  of the inefficient instrument.},
      url = {http://knowledge.uchicago.edu/record/9256},
}