Tiebout Model:

According to Tiebout the level and mix of local public expenditure and taxes are subjected to wide variations among local political jurisdictions.  So people will choose a particular community or jurisdiction whose public expenditure and tax level best suits their own preferences for public goods and services on the assumption that people can be mobile across communities. Thus, if the government expenditure and taxation pattern is fixed, citizens will maximize their well being by choosing a community or political jurisdiction, which Tiebout states as 'voting on their own feet' The most important assumptions of Tiebout Model are as follows.

First, all citizens are fully mobile across local jurisdictions.  Secondly, they possess full knowledge of the government budgets in alternative political jurisdictions. Thirdly, there are many communities that offer similar employment opportunities to their  residents. Fourthly, there are no inter-jurisdictional externalities. The final assumption is that an optimum community size is one which corresponds to minimum cost of the public services.

Under these assumptions, a quasi-market equilibrium is achieved when all citizens are located in that community which best satisfies their economic preferences. This is subject to the assumption that all communities provide government services at minimum unit cost.  It implies that communities above optimal size discourages new people to join them and communities, operating at below optimal size try to attract new people to join them. In this process some people may have to be content with a "Second - Choice" Community.  It is necessary to note that if communities can supply government services at constant costs, (absence of economies or diseconomies of scale) then equilibrium will be analogous to a market equilibrium. Such a situation may lead a one-person community or an infinite number of communities satisfying the citizen(s)' preferences. In this way competition among communities would result in an  efficient solution which is just similar to that  under perfectly competitive market  economy. The assumptions on which the basic tenets of the Tiebout hypothesis formed are extremely restrictive. But still the Tiebout Model is relevant as some households really respond to differences among government budgets in alternative communities. The model is not very useful in explaining mobility of citizens across larger geographical areas like the interstate but strongly advocates decentralized provision of public goods.