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Over the past 25 years, direct cash transfers (often abbreviated as direct benefit transfer, DBT) to the poorer section of the society are gaining popularity over explicit subsidization of prices of essential commodities. One of the main arguments in favor of DBT is that it will cost the government less money and yet, the consumer benefit will be high. This paper aims to examine the proposition critically. Removal of price support exposes the consumers to market risk, and any income support programme must compensate the consumers accordingly.

The authors use a theoretical study where the model of a representative consumer under different specification of preferences is used to compare programme costs under price stabilization and income support programmes.

What the authors show in the paper that the comparative cost of the programmes crucially depends on the nature of preferences, as well as the good under question. For certain specifications of the indirect utility function and the marginal utility of money, one programme may cost less than the other. Any policymaker must take account of such nuances before making a blanket prescription.

The main limitation is that only a representative consumer is taken.

The specification of indirect utility function plays a decisive role in deciding, which one these two policies, DBT or stabilizing price at a fixed level.

The main novelty of the paper is in the different specifications of the indirect utility function considered in the paper.

The purpose of this paper is to investigate conditions under which voters’ comparison of relative performance between adjacent jurisdictions can help reduce rent‐seeking by politicians.

A theoretical model was developed to examine the effectiveness of yardstick competition in restraining political corruption, first under a static setting, and then under a dynamic setting, using optimal control theory and differential games. It is assumed that voters compare the performance of their incumbent government with that of a neighboring jurisdiction. The incumbent can provide a public good and extract rent, which are financed by imposing a distortionary tax on the population. Politicians derive utility from rent as well as from popularity. The stock of reputation builds up or decays over time. Reputation is decreasing in rent appropriation.

Without assigning an ex ante type on the politician, the paper demonstrates the possibility that yardstick competition itself fails to restrict rent seeking. When the model is extended to a dynamic setting, it is shown that under unitary performance evaluation, dynamic incentives restrain the politician only if the shadow value of reputation (that measures current and future marginal benefits of increased reputation) is sufficiently high throughout the term. it is shown that, for such a high shadow value to exist, benefits of both instantaneous and end‐of‐period reputations have to be high enough. On the other hand, under relative performance evaluation, dynamic incentives impose more restrictions on rent appropriation in comparison to the static case.

This paper offers the first formal analysis, using differential games, of the role of the interaction between electoral considerations and neighborhood demonstration effects (with respect to relative rent extraction) in determining a politician's optimal rent‐seeking behaviour.