Journal Article

The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs

David Martimort

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 66, issue 4, pages 929-947
Published in print October 1999 | ISSN: 0034-6527
Published online October 1999 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1111/1467-937X.00114
The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs

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The dynamics of regulation is analysed in a model where regulatory capture comes from the repeated interaction between an interest group and a regulatory agency. Regulatory institutions offer a framework for this dynamic process. They put constraints on the interest group's influence. The dynamics of regulation and its long-run outcome depend on the political principal's, the regulator's and the regulated firm's time preferences and their information. Some foundations for the transaction costs of side-contracting used in the standard literature on collusion are provided. Those transaction costs are linked to the precise nature of regulatory institutions.

Journal Article.  0 words. 

Subjects: Economics

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