We examine the regulatory design of a market for products with interdependent demands, where regulated firms provide (imperfect) substitutes and can engage in lobbying activities. Under centralized regulation, a single regulator is established, whose mandate is to maximize aggregate welfare. Under decentralized regulation, each firm is assigned to a regulator charged with maximizing the welfare generated by that firm. With asymmetric cost information, centralized regulation results in a negative externality between firms when engaging in lobbying. Decentralized regulation removes this externality and reduces lobbying. Since this benefit comes at the cost of miscoordination between regulators, a trade-off results which favors decentralized regulation when goods are substitutes enough.

(2014). The regulation of markets with interdependent demands [journal article - articolo]. In INFORMATION ECONOMICS AND POLICY. Retrieved from http://hdl.handle.net/10446/132083

The regulation of markets with interdependent demands

Fiocco, Raffaele;
2014-01-01

Abstract

We examine the regulatory design of a market for products with interdependent demands, where regulated firms provide (imperfect) substitutes and can engage in lobbying activities. Under centralized regulation, a single regulator is established, whose mandate is to maximize aggregate welfare. Under decentralized regulation, each firm is assigned to a regulator charged with maximizing the welfare generated by that firm. With asymmetric cost information, centralized regulation results in a negative externality between firms when engaging in lobbying. Decentralized regulation removes this externality and reduces lobbying. Since this benefit comes at the cost of miscoordination between regulators, a trade-off results which favors decentralized regulation when goods are substitutes enough.
articolo
Fiocco, Raffaele; Scarpa, Carlo
(2014). The regulation of markets with interdependent demands [journal article - articolo]. In INFORMATION ECONOMICS AND POLICY. Retrieved from http://hdl.handle.net/10446/132083
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/132083
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