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Regulatory Governance Costs in Network Industries: Observations in Postal Regulation

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  • Martin Maegli
  • Christian Jaag

    ()

  • Matthias Finger

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.

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Bibliographic Info

Paper provided by Swiss Economics in its series Working Papers with number 0018.

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Date of creation: May 2010
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Publication status: Published in Competition and Regulation in Network Industries 11(2)
Handle: RePEc:chc:wpaper:0018

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Keywords: Governance costs; Network industries; Postal market;

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  1. Jaag, Christian, 2007. "Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations," MPRA Paper 6121, University Library of Munich, Germany.
  2. Dassler, Thoralf, 2006. "Combining theories of regulation - Proposing a framework for analysing regulatory systems worldwide," Utilities Policy, Elsevier, vol. 14(1), pages 31-43, March.
  3. Christian Jaag & Urs Trinkner, 2009. "A General Framework for Regulation and Liberalization in Network Industries," Working Papers 0016, Swiss Economics.
  4. Christian Jaag & Urs Trinkner, 2007. "Pricing in competitive two-sided mail markets," Working Papers 0007, Swiss Economics, revised Jul 2007.
  5. M. Finger & J. Groenewegen & R. Künneke, 2005. "The Quest for Coherence Between Institutions and Technologies in Infrastructures," Competition and Regulation in Network Industries, Intersentia, vol. 6(4), pages 227-260, December.
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  8. Bijl, P.W.J. de & Damme, E.E.C. van & Larouche, P., 2006. "Regulating access to stimulate competition in postal markets?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-175386, Tilburg University.
  9. Richard A. Posner, 1974. "Theories of Economic Regulation," NBER Working Papers 0041, National Bureau of Economic Research, Inc.
  10. Bonardi, Jean-Philippe & Holburn, Guy & Vanden Bergh, Rick, 2006. "Nonmarket performance: Evidence from U.S. electric utilities," MPRA Paper 14437, University Library of Munich, Germany.
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  12. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, October.
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  15. Frank A.G. den Butter & Marc de Graaf & Andr� Nijsen, 2009. "The Transaction Costs Perspective on Costs And Benefits of Government Regulation," Tinbergen Institute Discussion Papers 09-013/3, Tinbergen Institute.
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Cited by:
  1. Martin Maegli & Christian Jaag, 2012. "Competition and the Social Cost of Regulation in the Postal Sector," Working Papers 0032, Swiss Economics.

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