The politics of government decision making : regulatory institutions
Public decision makers are given a vague mandate to regulate industries. Restrictions on their instruments or scope of regulation affect their incentives to identify with interest groups and the effectiveness of supervision by watchdogs. This idea is illustrated in the contex...
| Main Authors: | , |
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| Format: | Working Paper |
| Published: |
MIT Center for Energy and Environmental Policy
Research
2009
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| Online Access: | http://hdl.handle.net/1721.1/50144 |
| _version_ | 1811068627371163648 |
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| author | Laffont, Jean-Jacques Tirole, Jean |
| author_facet | Laffont, Jean-Jacques Tirole, Jean |
| author_sort | Laffont, Jean-Jacques |
| collection | MIT |
| description | Public decision makers are given a vague
mandate to regulate industries. Restrictions on their instruments or scope of regulation
affect their incentives to identify with interest groups and the effectiveness of
supervision by watchdogs. This idea is illustrated in the context of the regulation of a
natural monopoly. Much of the theoretical literature has assumed that a benevolent regulator
is prohibited from operating transfers to the firm and maximizes social welfare subject to
the firm's budget constraint. The tension between the assumptions of benevolence and of
restrictions on instruments in such models leads us to investigate the role played by the
mistrust of regulators in the development of this institution. We compare two mandates:
average cost pricing (associated with the possibility of transfers). The regulator may
identify with the industry, but a regulatory hearing offers the advocacy groups (watchdogs)
an opportunity to alter the proposed rule making. The comparison between the two mandates
hinges on the dead-weight loss associated with collusion and on the effectiveness of
watchdog supervision. |
| first_indexed | 2024-09-23T07:58:46Z |
| format | Working Paper |
| id | mit-1721.1/50144 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T07:58:46Z |
| publishDate | 2009 |
| publisher | MIT Center for Energy and Environmental Policy
Research |
| record_format | dspace |
| spelling | mit-1721.1/501442019-04-09T15:54:43Z The politics of government decision making : regulatory institutions Laffont, Jean-Jacques Tirole, Jean Public decision makers are given a vague mandate to regulate industries. Restrictions on their instruments or scope of regulation affect their incentives to identify with interest groups and the effectiveness of supervision by watchdogs. This idea is illustrated in the context of the regulation of a natural monopoly. Much of the theoretical literature has assumed that a benevolent regulator is prohibited from operating transfers to the firm and maximizes social welfare subject to the firm's budget constraint. The tension between the assumptions of benevolence and of restrictions on instruments in such models leads us to investigate the role played by the mistrust of regulators in the development of this institution. We compare two mandates: average cost pricing (associated with the possibility of transfers). The regulator may identify with the industry, but a regulatory hearing offers the advocacy groups (watchdogs) an opportunity to alter the proposed rule making. The comparison between the two mandates hinges on the dead-weight loss associated with collusion and on the effectiveness of watchdog supervision. Supported by the Ford Foundation, the Pew Charitable Trust, the Guggenheim Foundation, the Center for Energy Policy Research at MIT, the National Science Foundation and the French Ministere de l'Education Nationale. 2009-12-15T23:53:03Z 2009-12-15T23:53:03Z 1989 Working Paper 90-011 http://hdl.handle.net/1721.1/50144 28596067 Working paper (Massachusetts Institute of Technology. Center for Energy Policy Research) ; MIT-CEPR 90-011. 38, 2, 4 p application/pdf MIT Center for Energy and Environmental Policy Research |
| spellingShingle | Laffont, Jean-Jacques Tirole, Jean The politics of government decision making : regulatory institutions |
| title | The politics of government decision making :
regulatory institutions |
| title_full | The politics of government decision making :
regulatory institutions |
| title_fullStr | The politics of government decision making :
regulatory institutions |
| title_full_unstemmed | The politics of government decision making :
regulatory institutions |
| title_short | The politics of government decision making :
regulatory institutions |
| title_sort | politics of government decision making regulatory institutions |
| url | http://hdl.handle.net/1721.1/50144 |
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