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on Regulation |
| By: | Roland Strausz |
| Abstract: | The paper provides a tractable, analytical framework to study regulatory risk under optimal incentive regulation. Regulatory risk is captured by uncertainty about the policy variables in the regulator’s objective function: weights attached to profits and costs of public funds. Results are as follows: 1) The regulator’s reaction to regulatory risk depends on the curvature of the aggregate demand function. 2) It yields a positive information rent effect exactly when demand is convex. 3) Firms benefit from regulatory risk exactly when demand is convex. 4) Consumers’ risk preferences tend to contradict the firm’s. 5) Benevolent regulators always prefer regulatory risk and these preferences may contradict both the firm’s and consumers’ preferences. |
| Keywords: | optimal incentive regulation, regulatory risk, procurement, information rents |
| JEL: | L51 D82 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2009-006&r=reg |
| By: | Barros, Pedro P. (Universidade Nova de Lisboa; CEPR); Hoernig, Steffen (Universidade Nova de Lisboa; CEPR); Nilssen, Tore (Dept. of Economics, University of Oslo) |
| Abstract: | Competition authorities must pay attention to many industries simultaneously. Sectoral regulators concentrate on their own industry. Often both types of authority may intervene in specific industries and there is an overlap of jurisdictions. We show how a competition authority’s resource allocation is affected by its relationships with sectoral regulators and their biases. If agencies collaborate (compete), the competition authority spends more effort on the industry with the more (less) consumer-biased sectoral regulator. The competition authority spends budget increases on the industry whose regulator reacts less to more effort. The socially optimal budget corrects for distortions due to regulatory bias, but only downwards. |
| Keywords: | Competitive authority; sectoral regulators; regulatory bias |
| JEL: | H11 L40 L51 |
| Date: | 2008–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2008_012&r=reg |
| By: | Benchekroun, H.; Ray Chaudhuri, A. (Tilburg University, Center for Economic Research) |
| Abstract: | We show that an environmental regulation such as a tax on pollution can act as a collusive device and induce stable cartelization in an oligopolistic polluting industry. We consider a dynamic game where pollution is allowed to accumulate into a stock over time and a cartel that includes all the firms in the industry. We show that a tax on pollution emissions can make it unprofitable for any firm to leave the cartel. Moreover the cartel formation can diminish the welfare gain from environmental regulation. We provide an example where social welfare under environmental regulation and collusion of firms is below social welfare under a laisser-faire policy. |
| Keywords: | pollution tax;oligopoly;cartel formation;coalition formation;differential game |
| JEL: | H41 L51 Q58 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200880&r=reg |
| By: | Howell Jackson |
| Abstract: | The financial crises of the past year have put the issue of financial regulatory structure on the front burner of public policy for the first time in many years, making possible reforms on a scale not imaginable since the Great Depression. Dramatic increases in market volatility, unprecedented interventions by the Federal Reserve Board to sustain securities firms, palpable failures to protect consumers in mortgage lending markets, and lingering concerns over the competitiveness of the American financial services industry have all combined to put regulatory reorganization on the national agenda. While the United States employs more financial regulators and expends a higher percentage of its gross domestic product on financial oversight than any other major country,1 events of the past few years suggest that the country has not obtained a higher quality of supervision than other jurisdictions. Indeed, to the extent the current credit turmoil had its origins in the United States, one could quite plausibly claim that our regulatory structure has done a good deal worse than other more streamlined systems in protecting consumers and ensuring market stability. As the rest of the world has moved towards more consolidated forms of regulatory oversight, a natural question posed by recent events is whether the United States should also undertake such a regulatory reorganization and, if so, how such a reorganization should be accomplished. |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:fmg:fmgsps:sp184&r=reg |
| By: | Anca Cotet (Department of Economics, Ball State University) |
| Abstract: | This paper uses variation in state by state regulation affecting telemedicine to investigate whether the quality standards imposed by current medical regulations are too high. The Physical Examination Requirement (PER) regulation prohibits certain physician-patient telemedicine practices, expected to be of lower quality than face-to-face consultations, in order to prevent the erosion of current quality standards. At the same time however, PER makes it more difficult for some individuals to obtain professional medical advice. The empirical results suggest that states that adopted such regulation experience an increase in mortality in some sub-populations. Specifically, such improved outcomes appear in more sparsely populated areas, in areas with low physician density in total population, for individuals earning relatively low or relatively high wages, and are more likely for infants and adults ages 24 through 65. In aggregate PER leads to an increase in infant mortality and no significant effect on other age groups, an indication that easier access to professional medical advice through telemedicine even at the cost of lower quality improves outcomes. |
| JEL: | I18 K32 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:bsu:wpaper:200902&r=reg |
| By: | Sonia Ben Kheder (Centre d'Economie de la Sorbonne); Natalia Zugravu (Centre d'Economie de la Sorbonne) |
| Abstract: | Although based on theoretical foundations, the pollution haven hypothesis stating that heterogenous environmental regulations between countries influence multinational firms' location decisions, has never been clearly proven empirically. In this study, we reexamine this hypothesis by a fresh take on both its theoretical and empirical aspects. While applying a geographic economy model on French firm-level data, we confirm the pollution haven hypothesis for a global sample. Through sensitivity analysis, we validate it for Central and Eastern European countries, emerging and high-income OECD countries, but not for the major part of the Commonwealth of Independent States countries. Finally, we show that the pollution haven hypothesis is confirmed in the strongest manner for emerging economies. |
| Keywords: | FDI, environmental regulation, economic geography, pollution haven hypothesis. |
| JEL: | F12 F18 Q28 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:v08083&r=reg |
| By: | Yannis Katsoulacos; David Ulph |
| Abstract: | We present a new welfare-based framework for optimally choosing legal standards in a variety of regulatory contexts. We formalise the decision-theoretic considerations widely discussed in the existing literature by capturing the quality of the underlying analysis and information available to a regulatory authority, and we obtain a precise set of conditions for determining when a Rule of Reason approach would be able to effectively discriminate between benign and harmful actions and consequently dominate Per Se as a decision-making procedure. We then show that in a welfare-based approach the choice between legal standards must additionally take into account (i) indirect (deterrence) effects of the choice of standard on the behaviour of all firms when deciding whether or not to adopt a particular practice; and (ii) procedural effects of certain features of the administrative process in particular delays in reaching decisions; and the coverage rate of the actions taking place. We therefore derive necessary and sufficient conditions for adopting discriminating rules (such as Rule of Reason). We also examine what type of discriminating rule will be optimal under different conditions that characterise different business practices. We apply our framework to two recent landmark decisions – Microsoft vs. EU Commission (2007) and Leegin Vs. PSKS (2007) – in which a change in legal standards has been proposed, and show that it can powerfully clarify and enhance the arguments deployed in these cases. |
| Keywords: | Legal standards, decision theoretic approach, Per Se, Rule of Reason, Competition Policy, discriminating decision rules. |
| JEL: | K0 K2 K4 L4 L5 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:san:wpecon:0812&r=reg |
| By: | Giorgio Calcagnini (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino); Germana Giombini (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino (Italy)) |
| Abstract: | This paper aims at analyzing the impact of Employment Protection Legislation (EPL) on rms' investment policies in the presence of financial imperfections. Our results show that investment is positively correlated to measures of internal funds available to firms and negatively to the level of national labour market regulation. Moreover, the latter is stronger wherever financial market imperfections are larger: firms with better access to financial markets are in a position to determine their optimal investment policy, even in the presence of stringent Employment Protection Laws, than those facing financial constraints. Our results support the effort put forward by European institutions in recent years to reform both markets. |
| Keywords: | Employment Protection Legislation, Financial Constraints, Investments. |
| JEL: | J30 D92 C23 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:urb:wpaper:09_02&r=reg |
| By: | Bonache, A. |
| Abstract: | The freight rail deregulation have been considered, for long time, as a factor of security and safety reduction. This article means to show that, for the moment, we can't consider french freight rail deregulation have a significative impact on security and safety. So, I look if it's possible that extreme accidents occur in this sector. Finally, I evaluate the extreme accidents periodicity in freight rail. |
| Keywords: | security; safety; regulation; extreme value projection; accidents; freight rail; transport. |
| JEL: | J28 R41 L43 |
| Date: | 2008–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12962&r=reg |
| By: | Daniel C. L. Hardy |
| Abstract: | The EU is deliberating the introduction of an explicit "European mandate" for financial sector supervisors to supplement national mandates. Suggestions are made on (i) the formulation of a European mandate; (ii) the policy areas to which it should apply; (iii) which institutions should be given a European mandate; (iv) the legal basis for the mandate; (v) how to implement the mandate in practice; and (vi) how to achieve accountability for fulfilling a European mandate. Decisions on these issues are needed if the introduction of a European mandate is to have a substantive positive effect. |
| Date: | 2009–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/5&r=reg |
| By: | Philip Keitel |
| Abstract: | On July 23, 2008, the Payment Cards Center of the Federal Reserve Bank of Philadelphia hosted a workshop to discuss federal and state legislative responses to data breaches. The workshop addressed several laws and legislative initiatives designed to create greater safeguards for personal consumer information frequently targeted by data thieves and often subject to the failures of information security protocols. Diane Slifer, J.D., M.B.A., who has frequently presented at forums on data security and has represented clients in matters related to data breaches, led the workshop. Slifer examined several highly publicized data breaches and explained how various laws and regulations have been put in place in order to protect and inform consumers whose personal information has been compromised. Additionally, she discussed several legislative initiatives designed to potentially create a more structured and secure environment for private consumer data overall. This paper summarizes Slifer?s presentation, the ensuing discussion, and additional Payment Cards Center research. In addition, it offers a brief overview of recent data breaches, a description of various ways that federal and state laws operate, and some thoughts on how effective these laws and regulations have been. |
| Keywords: | Payment systems ; Identity theft ; Fraud ; Law and legislation |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpdp:08-09&r=reg |
| By: | Larouche, P. (Tilburg University, Tilburg Law and Economics Center) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2008020&r=reg |
| By: | Luca Anderlini (Department of Economics, Georgetown University); Leonardo Felli (Department of Economics, London School of Economics and Political Science); Andrew Postlewaite (Department of Economics, University of Pennsylvania) |
| Abstract: | We find an economic rationale for the common sense answer to the question in our title - courts should not always enforce what the contracting parties write. We describe and analyze a contractual environment that allows a role for an active court. An active court can improve on the outcome that the parties would achieve without it. The institutional role of the court is to maximize the parties' welfare under a veil of ignorance. We study a buyer-seller model with risk-neutral agents and asymmetric information. The court must decide when to uphold a contract and when to void it. The parties know their private information at the time of contracting, and this drives a wedge between ex-ante and interim-efficient contracts. In particular, if the court enforces all contracts, inefficient pooling obtains in equilibrium. By voiding some contracts the court is able to induce them to separate, and hence improve ex-ante welfare. |
| Keywords: | Optimal Courts, Informational Externalities, Ex-Ante Welfare |
| JEL: | C79 D74 D89 K40 L14 |
| Date: | 2009–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:09-004&r=reg |