Approval regulation and learning, with application to timing of merger control

Marco Ottaviani and Abraham L Wickelgren

The Journal of Law, Economics, and Organization, 2024, vol. 40, issue 3, 597-624

Abstract: This article analyzes the optimal combination of ex ante and ex post regulation of an activity in a two-period model. Additional information about the sign and extent of the externality associated with the activity becomes available only once a private party undertakes the activity, but undoing the activity at that stage is costly. We characterize when the regulator should commit not to reevaluate the activity ex post. The case for ex post regulation is strengthened if the private party can signal its private information about the consequences of the activity, but it is weakened if the cost of undoing the activity can be manipulated.

Date: 2024
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