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When organization encounters uncertainty in regulatory times

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  • Xiao, Fenglong
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    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.

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    File URL: http://mpra.ub.uni-muenchen.de/36240/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36240.

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    Date of creation: 22 May 2011
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    Publication status: Published in International Journal of Applied Business and Economic Research 9.2(2011): pp. 177-184
    Handle: RePEc:pra:mprapa:36240

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    Keywords: Regulation; Organization; Contract; Uncertainty;

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    1. Alberto Martin & Jaume Ventura, 2011. "Theoretical Notes on Bubbles and the Current Crisis," IMF Economic Review, Palgrave Macmillan, vol. 59(1), pages 6-40, April.
    2. Tilman Bruck, 2005. "An Economic Analysis Of Security Policies," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(5), pages 375-389.
    3. Georges Enderle, 2010. "Wealth Creation in China and Some Lessons for Development Ethics," Journal of Business Ethics, Springer, vol. 96(1), pages 1-15, September.
    4. Georges Enderle, 2009. "A Rich Concept of Wealth Creation Beyond Profit Maximization and Adding Value," Journal of Business Ethics, Springer, vol. 84(3), pages 281-295, February.
    5. Rolf H. Weber, 2010. "Multilayered Governance in International Financial Regulation and Supervision," Journal of International Economic Law, Oxford University Press, vol. 13(3), pages 683-704, September.
    6. George Lermer & W. T. Stanbury, 1985. "Measuring the Cost of Redistributing Income by Means of Direct Regulation," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 190-207, February.
    7. Gary Fromm, 1981. "Studies in Public Regulation," NBER Books, National Bureau of Economic Research, Inc, number from81-1, May.
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