Bribery and public debt repudiation

In cases where policy makers accept "bribes'' offered by organised lobbies or interested parties, government decisions can be modelled as a first pric e menu auction. In this paper we adapt this structure to model debt repudia tion. We consider a one-period model in which two generations, parents and children, are present, and debt titles are unevenly distributed among paren ts. The government can repay the debt by a combination of taxes on the chil dren's income and on the outstanding debt. We exclude intergenerational con flicts, assuming that the parents' and children's objective is to maximise the utility of the family. In this perspective, families make offers that r elate monetary contributions to the tax structures chosen by the government . On the hypothesis that all interests are represented, we obtain the resul t that the government is indifferent to the tax structure.