Regulatory Risk under Optimal Incentive Regulation
Roland Strausz
No 2638, CESifo Working Paper Series from CESifo
Abstract:
The paper provides a tractable, analytical framework to study regulatory risk. Regulatory risk is captured by uncertainty about the policy variables in the regulator’s objective function: weights attached to profits and costs of public funds. Results are as follows: 1) The regulator’s reaction to regulatory risk depends on the curvature of aggregate demand. 2) It yields a positive information rent effect exactly when demand is convex. 3) Firms benefit from regulatory risk exactly when demand is convex. 4) Consumers’ risk preferences tend to contradict the firm’s. 5) Benevolent regulators always prefer regulatory risk and these preferences may contradict both the firm’s and consumers’.
Keywords: optimal incentive regulation; regulatory risk; benevolent regulators; information rents (search for similar items in EconPapers)
JEL-codes: D82 L51 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)
Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp2638.pdf (application/pdf)
Related works:
Working Paper: Regulatory risk under optimal incentive regulation (2009) 
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:ces:ceswps:_2638
Access Statistics for this paper
More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().