A theory of soft capture

Per Agrell () and Axel Gautier ()

No 2010084, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In this paper, wee propose a model for regulatory capture that is based on information transmission and asymmetric information. In a three- tier model, a regulator is charged by a political principal to provide a signal for the type of a regulated firm. Only the firm can observe his type and the production of a correlated signal with a given accuracy is costly for the regulator. The firm can costlessly provide an alternative signal of lower accuracy that is presented to the regulator. In a self-enforcing equilibrium, the regulator transmits the firm-produced signal, internalizes its own savings in information cost and the firm enjoys higher information rents. The main feature of soft capture is that it is not based on a reciprocity of favors but on a congruence of interests between the firm and the regulator.

Keywords: regulation; capture; information (search for similar items in EconPapers)
JEL-codes: D72 L51 (search for similar items in EconPapers)
Date: 2010-12-01
New Economics Papers: this item is included in nep-cta and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: A Theory of Soft Capture (2017)
Working Paper: A Theory of Soft Capture (2017)
Working Paper: A theory of soft capture (2017)
Working Paper: A Theory of Soft Capture (2011)
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