This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Subsidiarity Bias in Regulation

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jean-Jacques Laffont (IDEI and GREMAQ (UMR 5603 CNRS), Universite des Sciences Sociales, Place Anatole-France,)
Jerome Pouyet () (CERAS-ENPC (URA 2036 CNRS), 28 rue des Saint Peres, 75007 Paris, France.)

Additional information is available for the following registered author(s):

Abstract

We study the choice of the regulatory structure when a regulated firm engages in different activities for different countries. Under decentralization each activity is regulated independently and the contracts offered to the firm suffer from two oppos- ite distortions with respect to centralization: the competition between regulatory authorities forces them to offer too high-powered incentive contracts; however, be- cause the ownership structure of the firm is dispersed across the countries, each regulator does not fully internalize the effect of his regulation on the firm's rent and contracts tend to be too low-powered. When the activities of the firm are suf- ficiently substitutable we show that decentralization always leads to an inefficient drift of the regulatory contracts towards fixed-price contracts. Nonetheless, when regulators have private agendas and possess the discretion to distort their policy to gain the support of some interest groups, then decentralization of the regulat- ory powers may be preferred to centralization as competition between regulatory authorities eradicates their discretionary power.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.dse.uniba.it/Quaderni/SERIES/1_Laffont.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Dipartimento di Scienze Economiche - Università di Bari in its series series with number 0001.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 33
Date of creation:
Date of revision:
Handle: RePEc:bai:series:wp0001

Contact details of provider:
Postal: Via Camillo Rosalba, 53 - 70124 - Bari ITALY
Phone: +390805049042
Fax: +390805049149
Web page: http://www.dse.uniba.it
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ruggiero Marco Paolillo).

Related research
Keywords: incentives; decentralization; regulation;

Other versions of this item:

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January. [Downloadable!] (restricted)
    Other versions:
  2. Oliver Hart & John Moore, 1999. "On the Design of Hierarchies: Coordination Versus Specialization," NBER Working Papers 7388, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Auriol, Emmanuelle & Laffont, Jean-Jacques, 1992. "Regulation by Duopoly," IDEI Working Papers 20, Institut d'Économie Industrielle (IDEI), Toulouse.
    Other versions:
  4. Caillaud, B. & Jullien, B. & Picard, P., 1996. "National vs European incentive policies: Bargaining, information and coordination," European Economic Review, Elsevier, vol. 40(1), pages 91-111, January. [Downloadable!] (restricted)
  5. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-41, June. [Downloadable!] (restricted)
    Other versions:
  6. Noll, Roger., 1983. "The Political Foundations of Regulatory Policy," Working Papers 486, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  7. Pranab Bardhan and and Dilip Mookherjee., 1999. "Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization," Center for International and Development Economics Research (CIDER) Working Papers C99-109, University of California at Berkeley. [Downloadable!]
    Other versions:
  8. Raaj Kumar Sah & Joseph E. Stiglitz, 1987. "The Architecture of Economic Systems: Hierarchies and Polyarchies," NBER Working Papers 1334, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-38, March. [Downloadable!] (restricted)
  10. Olsen, Trond E & Torsvik, Gaute, 1993. "The Ratchet Effect in Common Agency: Implications for Regulation and Privatization," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(1), pages 136-58, April.
  11. Laffont, Jean-Jacques & Zantman, Wilfried, 2002. "Information acquisition, political game and the delegation of authority," European Journal of Political Economy, Elsevier, vol. 18(3), pages 407-428, September. [Downloadable!] (restricted)
  12. Jean-Jacques Laffont & David Martimort, 1998. "Collusion and Delegation," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 280-305, Summer. [Downloadable!] (restricted)
    Other versions:
  13. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February. [Downloadable!] (restricted)
  14. Laffont, Jean-Jacques, 1996. "Industrial policy and politics," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 1-27. [Downloadable!] (restricted)
  15. Gilbert, Guy & Picard, Pierre, 1996. "Incentives and optimal size of local jurisdictions," European Economic Review, Elsevier, vol. 40(1), pages 19-41, January. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Felgenhauer, Mike & Grüner, Hans Peter, 2007. "Safety Nets Within Banks," CEPR Discussion Papers 6317, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB). [Downloadable!]
  3. Diaw, K.M. & Pouyet J.,, 2004. "Competition, incomplete discrimination and versioning," Discussion Paper 69, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  4. Attar, Andrea & Mariotti, Thomas & Salanié, François, 2009. "Non-Exclusive Competition in the Market for Lemons," IDEI Working Papers 558, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  5. Diaw, K.M. & Pouyet, J., 2004. "The dilemma of tax competition : how (not) to attract (inefficient) firms?," Discussion Paper 68, Tilburg University, Center for Economic Research. [Downloadable!]
  6. Juan Luis Jiménez & Javier Campos, 2004. "Efectos de la descentralización de la política de defensa de la competencia," Documentos de trabajo conjunto ULL-ULPGC 2004-09, Facultad de Ciencias Económicas de la ULPGC. [Downloadable!]
Statistics
Access and download statistics

Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".

This page was last updated on 2009-11-14.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.