Institutions, efficiency and the strategic behaviour of sponsors and bureaus

The over-production associated with bureaucratic production is examined in a general equilibrium environment in which the bureau and its sponsor behave strategically. Seemingly minor modifications in institutional settings give major differences in Nash equilibrium outcomes. The non-equivalence of institutional settings suggests that over-production or under-production by bureaus can be a result of the institutions governing the decision process as well as the preferences of the bureau for the size of the bureau.