Commodity Bundling and Agenda Control in the Public Sector

Abstract

In the public sector, commodity bundling involves an agenda setter exercising control over a governmental unit's budgetary mix—the allocation of the unit's total budget to its various subactivities—in order to manipulate electoral outcomes on other fiscal variables such as the total budget. This paper develops an analytical model of a political market in which a multi-activity governmental unit practices commodity bundling in order to advance the interests of the setter. Two institutional structures are considered, each involving a different voting process or set of electoral constraints and, hence, a different form of commodity bundling. The paper explores the impact of this form of monopoly power on such policy outcomes as the governmental unit's total budget, its budgetary mix, and the distribution of net benefits from collective action.