Regulatory Fog: The Informational Origins of Regulatory Persistence
AbstractCompared with other types of policy, regulation is very persistent, even when inefficient. We propose an explanation for regulatory persistence based on regulatory fog,the phenomenon by which regulation obscures information about the e ects of deregulation. We construct a dynamic model of regulation in which the underlying need for regulation varies stochastically, and regulation undermines the regulator's ability to observe the state of the world. Compared to the full-information benchmark, regulation is highly persistent, often lasting inde nitely. The regulatory fog e ect is robust to a broad range of partially informative policies and can be quite detrimental to social welfare.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1113.
Length: 35 pages
Date of creation: 2010
Date of revision:
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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
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Web page: http://www.economics.unimelb.edu.au
More information through EDIRC
Regulation; Information; Experimentation;
Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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