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Anger and Regulation

Author

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  • Rafael Tella
  • Juan Dubra

Abstract

We study a model in which agents experience anger when they see a firm that has displayed insufficient concern for the welfare of its clients (i.e., altruism) making high profits. Regulation can increase welfare, for example, through fines (even with no changes in prices). Besides the standard channel (i.e., efficiency), regulation affects welfare through two other channels. (i) Regulation calms down existing consumers, because a reduction in the profits of an unkind firm increases total welfare by reducing consumer anger. (ii) Individuals who were out of the market when they were angry in the unregulated market decide to purchase once the firm is regulated.

Suggested Citation

  • Rafael Tella & Juan Dubra, 2014. "Anger and Regulation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(3), pages 734-765, July.
  • Handle: RePEc:bla:scandj:v:116:y:2014:i:3:p:734-765
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    File URL: http://hdl.handle.net/10.1111/sjoe.12068
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rafael Di Tella & Juan Dubra, 2010. "Peronist Beliefs and Interventionist Policies," NBER Working Papers 16621, National Bureau of Economic Research, Inc.
    2. repec:spr:laecrv:v:27:y:2018:i:1:d:10.1007_s40503-017-0046-5 is not listed on IDEAS
    3. Magnus Söderberg & Makoto Tanaka, 2012. "Spatial price homogeneity as a mechanism to reduce the threat of regulatory intervention in locally monopolistic sectors," Working Papers hal-00659458, HAL.

    More about this item

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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