EconPapers    
Economics at your fingertips  
 

Bargaining and collusion in a regulatory relationship

Raffaele Fiocco () and Mario Gilli ()

Journal of Economics, 2016, vol. 117, issue 2, 93-116

Abstract: We investigate regulation as the outcome of a bargaining process between a regulator and a regulated firm. The regulator is required to monitor the firm’s costs and to reveal its information to a political principal (Congress). In this setting, we explore the scope for collusion between the regulator and the firm, which results in the manipulation of the regulator’s report on the firm’s costs to Congress. The firm’s benefit of collusion arises from the higher price the efficient firm is allowed to charge when the regulator reports that it is inefficient. However, a higher price reduces the gains from trade the parties can share in the bargaining process. As a result of this trade-off, the efficient firm has a stake in collusion only if the regulator’s bargaining power in the regulatory relationship is relatively high. Then, we derive the optimal institutional response to collusion and characterize the conditions under which allowing collusion is desirable. Copyright Springer-Verlag Wien 2016

Keywords: Asymmetric information; Auditing; Bargaining; Collusion; Regulation; D73; D82; L51 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1007/s00712-015-0456-2 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Bargaining and collusion in a regulatory relationship (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:117:y:2016:i:2:p:93-116

DOI: 10.1007/s00712-015-0456-2

Access Statistics for this article

Journal of Economics is currently edited by Giacomo Corneo

More articles in Journal of Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2023-01-03
Handle: RePEc:kap:jeczfn:v:117:y:2016:i:2:p:93-116