Politically Induced Regulatory Risk and Independent Regulatory Agencies

Roland Strausz

No 44, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: Uncertainty in election outcomes generates politically induced regulatory risk. For monopoly regulation, political parties\' risk attitudes towards such risk depend on a fluctuation effect that hurts both parties and an output--expansion effect that benefits at least one party. Irrespective of the parties\' risk attitudes, political parties have incentives to negotiate away regulatory risk by pre-electoral bargaining. Pareto-efficient bargaining outcomes fully eliminate regulatory risk and are attainable through institutionalizing independent regulatory agencies with a specific objective. Key aspects of the regulatory overhaul of the US Postal system in 1970 are argued to be consistent with these results.

Keywords: regulation; independent regulatory agency; regulatory risk; electoral uncertainty (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2017-07-31
New Economics Papers: this item is included in nep-cdm, nep-pol and nep-reg
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Politically induced regulatory risk and independent regulatory agencies (2017)
Working Paper: Politically Induced Regulatory Risk and Independent Regulatory Agencies (2015)
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