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The Politics of Government Decision-Making: A Theory of Regulatory Capture

Jean-Jacques Laffont and Jean Tirole

The Quarterly Journal of Economics, 1991, vol. 106, issue 4, 1089-1127

Abstract: The paper develops an agency-theoretic approach to interest-group politics and shows the following: (1) the organizational response to the possibility of regulatory agency politics is to reduce the stakes interest groups have in regulation. (2) The threat of producer protection leads to low-powered incentive schemes for regulated firms. (3) Consumer politics may induce uniform pricing by a multiproduct firm. (4) An interest group has more power when its interest lies in inefficient rather than efficient regulation, where inefficiency is measured by the degree of informational asymmetry between the regulated industry and the political principal (Congress).

Date: 1991
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Citations: View citations in EconPapers (389)

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Related works:
Working Paper: The Politics of Government Decision-Making: a Theory of Regulatory Capture (1990)
Working Paper: The Politics of Government Decision-Making: A Theory of Regulatory Capture (1988)
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