On the Incentive for a Self-Interested Policymaker to Mimic the Behavior of a Social-Welfare Maximizer

We consider a government consisting of two policy implementation departments, each of which is self-interested. We examine whether each of these departments disguise itself as a social-welfare maximizer in the sense that it adopts welfare maximization as its “surface” objective to determine the policy variable, although its “true” objective is self-interest maximization under a tariff/subsidy scheme. We also examine whether an increase in the number of departments disguising themselves as welfare maximizers improves welfare. When the cost difference between home and foreign firms is at the intermediate level, the subsidy department does not disguise itself as a benevolent policymaker, whereas the tariff department may do so. In addition, the welfare level in the partial disguise case is lower than that in the no disguise case.