The Politics of Government Decision-Making : a Theory of Regulatory Capture
AbstractThe paper develops an agency-theoretic approach to interest-group politics and shows the following: (1) the organizational response to the possibility of regulatory agency politics is to reduce the stakes interest groups have in regulation; (2) the threat of producer protection leads to low-powered incentive schemes for regulated firms; (3) consumer politics may induce uniform pricing by a multiproduct firm; and (4) an interest group has more power when its interest lies in inefficient rather than efficient regulation, where inefficiency is measured by the degree of informational asymmetry between the regulated industry and the political principal (Congress). Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoPaper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 9004.
Length: 52 pages
Date of creation: Jan 1990
Date of revision:
Publication status: Published in Quarterly Journal of Economics, vol.106, 1991, pp. 1089-1127
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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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Other versions of this item:
- Laffont, Jean-Jacques & Tirole, Jean, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1089-127, November.
- Jean-Jacques Laffont & Jean Tirole, 1988. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," Working papers 506, Massachusetts Institute of Technology (MIT), Department of Economics.
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