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The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs

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  • David Martimort

Abstract

The dynamics of regulation is analysed in a model where regulatory capture comes from the repeated interaction between an interest group and a regulatory agency. Regulatory institutions offer a framework for this dynamic process. They put constraints on the interest group's influence. The dynamics of regulation and its long-run outcome depend on the political principal's, the regulator's and the regulated firm's time preferences and their information. Some foundations for the transaction costs of side-contracting used in the standard literature on collusion are provided. Those transaction costs are linked to the precise nature of regulatory institutions.

Suggested Citation

  • David Martimort, 1999. "The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 929-947.
  • Handle: RePEc:oup:restud:v:66:y:1999:i:4:p:929-947.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00114
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