When organization encounters uncertainty in regulatory times

Fenglong Xiao

MPRA Paper from University Library of Munich, Germany

Abstract: Regulatory policy is a considerable factor in organizational business strategy decisions. This article puts focus on the evaluation of the regulatory policy from the perspective of the organizational cost under uncertainty. In this paper I examine the organizational cost of policy transition in different scenarios, and consider, further, what the impact on the macroeconomic and business policy would be. Three conclusions are reached: 1. The cost of strategy adoption of organizations under regulation in a monopolized industry is only affected by their own risk tolerance of uncertainty and the cost of information; 2. when the regulation is enacted in a more competitive market, the cost of information would raise with a higher expected loss comparing with the same regulation in monopolized market; 3. If the claim of such measurement is true, the net benefit or loss of regulation is exactly the difference between organizational information cost and regulatory benefit. So the policy that guarantees the positive communication and transparent information exchange that helps to reduce the organizational information cost is necessary for an efficient regulatory policy.

Keywords: Regulation; Organization; Contract; Uncertainty (search for similar items in EconPapers)
JEL-codes: D81 L22 L51 (search for similar items in EconPapers)
Date: 2011-05-22
New Economics Papers: this item is included in nep-cta and nep-reg
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Published in International Journal of Applied Business and Economic Research 9.2(2011): pp. 177-184

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https://mpra.ub.uni-muenchen.de/36258/4/MPRA_paper_36258.pdf revised version (application/pdf)

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