Regulatory Governance Costs in Network Industries: Observations in Postal Regulation

Martin Maegli, Christian Jaag and Matthias Finger

No 18, Working Papers from Swiss Economics

Abstract: The various actors in the regulated industries relate to each other within a broader institutional framework, i.e., by way of formal and informal rules. An important role in the implementation of liberalization processes is given to regulation and thus to regulatory institutions. The rationale for regulation is its positive effect on society by correcting market failures. But regulatory intervention also causes costs which we call ?costs of regulatory governance?. These costs result from negative consequences caused by regulatory requirements and from the implementation of regulatory instruments. These costs will depend upon the formal and informal rules among the involved actors, upon the allocation of property rights among these actors, as well as upon the various principal-agent or more generally contractual relationships among these actors. We distinguish between direct and indirect costs of regulation: Direct costs occur in relation with the institutional design of the regulatory framework and the behavior of actors. Indirect costs result from distortive incentives and finally turn out in an inefficient supply of goods and services. Using the example of the Swiss postal market we offer a first outline of a possible application of the framework. In this article we neither intend to quantify regulatory costs nor do we question regulation per se. We rather present a qualitative framework which helps to structure a discussion about regulatory challenges in network industries.

Keywords: Governance costs; Network industries; Postal market (search for similar items in EconPapers)
JEL-codes: L51 (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-net and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Competition and Regulation in Network Industries 11(2)

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Journal Article: Regulatory Governance Costs in Network Industries: Observations in Postal Regulation (2010)
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