Capture, Politics and Antitrust Effectiveness

Rocco Ciciretti, Simone Meraglia () and Gustavo Piga
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Simone Meraglia: Toulouse School of Economics

No 208, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We study the ex-ante budget devoted by a Political Principal to a Competition Authority in charge of collecting evidence on the Industry's behavior. The Industry can capture both the Principal (lobbying) for a reduced budget, and the Authority (side-contracting) so as to avoid fines. Authority's capture is costly to the Principal when side-contracting is sufficiently efficient. Collusion proofness induces high-powered incentives for the Authority, hence fostering the Authority's willingness to spend the allocated budget. For intermediate values of side-contracting's efficiency, in this moral hazard setting we find that the optimal budget increases as side-contracting gets more efficient. Only when side-contracting's efficiency reaches high enough values the budget decreases, thus generating a discrepancy between the Authority's and the Principal's desired level of information gathering. Finally, a complementarity between lobbying of the Principal and capture of the Authority arises.

Keywords: Budget; Law Enforcement; Three-tier Hierarchy; Moral Hazard; Collusion-Proofness; Lobbying. (search for similar items in EconPapers)
JEL-codes: D72 D73 D82 K21 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011-07-14, Revised 2013-04-05
New Economics Papers: this item is included in nep-com, nep-cta, nep-pol and nep-reg
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