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If there are political consequences for such detection (e.g. reputational consequences) governors will not tend to deviate from the targeted allowance rate.
Put another way, for a fixed penalty from the SSA, an increased probability of detection should reduce the willingness of governors to deviate from the targeted allowance rate.
However, as the penalty level adjusts, for a given utility level, governors will seek to minimize the distance between the allowance rate they set in the first period and the perceived SSA targeted allowance rate.
First-term governors, however, will not have the benefit of this warning and thus must start from scratch, setting allowance rates with no information on the SSA's targeted allowance rate level.
This is based on a simple cost-benefit trade-off; as the returns to increased allowance rates increases, governors will optimize conditional on the penalty level and the more information a governor has about the targeted allowance rate of the SSA (and thus the degree to which they risk detection for deviating), the greater is the increased allowance rate.
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This tendency will be reduced the more information a governor has about the target allowance rate of the SSA (and thus for multi-term governors). .
This tendency will be reduced the more information a governor has about the target allowance rate of the SSA (and thus for multi-term governors).
Hughes has been holding detailed discussions with Andy Burnham, the shadow education secretary who has been leading a campaign against the cut, about the wording of the motion after the coalition announced it would save £500m by targeting the allowance at needy students.
A report by Lib Dem MP Paul Burstow said targeting the allowance would help pay for a fairer social care system.
Further education will be cut by £1.1bn by 2014/15 and the "poorly targeted" education maintenance allowance for 16- to 19-year-olds is abolished.
George Osborne said he would cut a "supplementary charge" rate from 32%to30%0%, extend other breaks from six to 10 years and provide a new allowance targeted on certain areas, at a time of increasing redundancies in Aberdeen.
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