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Regulatory Contracts and Stakeholder Regulation

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  • Tony Prosser

Abstract

**: This paper examines the application of the concept of a regulatory contract in the analysis of UK utilities regulation. It argues that there are serious problems in conceiving of regulatory relations as analogous to contracts, though particular contracts may be a useful tool in the regulatory armoury. This is partly due to problems with principal/agent theory, which has been conceived in different ways by economists and lawyers, and partly due to the essentially political nature of regulatory relations, which make it difficult to tie down regulatory discretion in ways which resemble contractual relations. There is also ambiguity as to who is principal and who is agent, with the danger of adopting a single theoretical category for relationships which are radically different. The early legal structures adopted for UK utility regulation did have elements of a regulatory contract, but with the growth of competition and social regulation, a different model, that of a network of stakeholders, has largely replaced it. This offers the opportunity to develop more sophisticated regulatory procedures, but does not replace the need for substantive values drawn from economics but also from public service values as guides for regulatory decisions.

Suggested Citation

  • Tony Prosser, 2005. "Regulatory Contracts and Stakeholder Regulation," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 76(1), pages 35-57, March.
    • Handle: RePEc:bla:annpce:v:76:y:2005:i:1:p:35-57
    DOI: 10.1111/j.1370-4788.2005.00270.x
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    References listed on IDEAS

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    1. Brousseau,Eric & Glachant,Jean-Michel (ed.), 2002. "The Economics of Contracts," Cambridge Books, Cambridge University Press, number 9780521893138.
    2. Tonci Bakovic & Bernard Tenenbaum & Fiona Woolf, 2003. "Regulation by Contract : A New Way to Privatize Electricity Distribution?," World Bank Publications - Books, The World Bank Group, number 15078, December.
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    4. Brousseau,Eric & Glachant,Jean-Michel (ed.), 2002. "The Economics of Contracts," Cambridge Books, Cambridge University Press, number 9780521814904.
    5. Cheffins, Brian R., 1997. "Company Law: Theory, Structure and Operation," OUP Catalogue, Oxford University Press, number 9780198764694.
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    Cited by:

    1. Jean‐Michel Glachant, 2008. "La Deregulation Des Industries De Reseaux Comme Politique Institutionnelle De Creation De Marches Et De Mecanismes De Gouvernance," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 79(3‐4), pages 487-525, September.
    2. Rocco Caferra & Andrea Morone & Piergiuseppe Morone & Paolo Storelli, 2022. "Professional traders’ individual and social preferences under risk: Does group's wealth matter?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(4), pages 1063-1082, December.
    3. Franceys, Richard W.A. & Gerlach, Esther, 2011. "Consumer involvement in water services regulation," Utilities Policy, Elsevier, vol. 19(2), pages 61-70, June.
    4. Jean-Michel Glachant, 2012. "Regulating Networks in the New Economy," Review of Economics and Institutions, Università di Perugia, vol. 3(1).
    5. Goyal Yugank, 2017. "Informal Institutions in the Regulatory State: The Case of Bureaucracy in India," The Law and Development Review, De Gruyter, vol. 10(1), pages 147-177, June.
    6. Gabriel OBERMANN, 2007. "The Role Of The State As Guarantor Of Public Services: Transaction Cost Issues And Empirical Evidence," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(3), pages 475-500, September.

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