Incentives Selection and Reputation of Government in the Supply of Public Rental Housing in China: A Household Survey Data

Abstract

The enforcement and pricing problems of the effective supply of public products have always been a hot academic topic, but the basic research paradigm is always principal-agent framework of central and local governments. This paradigm has neglected the ordinary households’ preferences which are the actual public demand, which is the argument foundation of our study. So using the public rental housing as the analysis object, the households’ preferences as the foundation for analyzing the government behavior, through principal-agent dynamic game with imperfect information and signal game with mixed strategy, we research which levels of incentives should the central government choose and how does the reputation effect of local government influent the long-term supply of public rental housing. Results show that under the premises that the local government pursue the maximization of achievements utility and economic utility, the enforcement of the supply of public rental housing significantly related to the levels of central government’s incentives, strong incentives have marginal amplification effect and weak incentives have marginal narrow effect. When information is so incomplete that households cannot distinguish the quality of public rental housing in advance, the equilibrium rent will be influented by the government reputation, that is the construction quality of public rental housing. The government reputation is closely related to the gap between the rent determined by the local government and the rent that households willing to pay.