 Coordination and the provision of incentives to a common regulated firmJohann Caro-Burnett and Vinicius Carrasco International Journal of Industrial Organization, 2011, vol. 29, issue 5, 606-627 Abstract: This paper considers the problem faced by two regulators in providing incentives to a common (privately informed) regulated firm under various degrees of coordination. In the model, the firm exerts effort toward cost reduction and self-dealing, and incentives can be input-based (monitoring) and output-based (demanded cost targets). Full coordination between the regulators leads to the second best allocation. A setting in which the regulators do not fully coordinate leads to (i) higher overall monitoring (more aggressive input-based incentives) and (ii) higher demanded cost targets (i.e., more lenience in terms of output-based incentives). As a consequence of (i), in all possible equilibria, the effort toward cost reduction will be smaller when the agent reports to two regulators who do not coordinate. (i) and (ii) imply that the impact on the effort toward self-dealing activities is ambiguous. In our leading example, self-dealing will be larger if the regulators coordinate on monitoring levels but smaller if they choose monitoring levels independently. Keywords: Regulation; Common; agency; Coordination; Input; and; output; based; incentives (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:29:y:2011:i:5:p:606-627 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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