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On endogenous economic regulation

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  • Stanley Reiter

Abstract

This paper presents a model in which in each of a succession of time periods the State and the private economy interact to determine rules under which the private agents will operate in the next period, and rules and resources that constrain interventions of the State in the next period. The set of State institutions, called regulators, that are the instruments of State intervention is endogenously determined in each period. The model is a multiperiod game consisting of two phases. The first is a (noncooperative) game played by private economic agents in each period, the rules for which are given by the regulators in the preceding period. The second phase is political. In each period the private agents acting politically determine the legal and budgetary constraints under which the regulators will operate in the next period, and thereby determine the noncooperative game to be played in the next period. Formal entities in the model allow a wide variety of regulatory instruments and transfer payments to be represented.
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Suggested Citation

  • Stanley Reiter, 1996. "On endogenous economic regulation," Review of Economic Design, Springer;Society for Economic Design, vol. 2(1), pages 211-243, December.
    • Handle: RePEc:spr:reecde:v:2:y:1996:i:1:p:211-243
    DOI: 10.1007/BF02499134
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    References listed on IDEAS

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    1. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    2. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
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    7. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    8. Noll, Roger G., 1989. "Economic perspectives on the politics of regulation," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 22, pages 1253-1287, Elsevier.
    9. Stanley Reiter & Jonathan Hughes, 1980. "A Preface on Modelling the Regulated U.S. Economy," Discussion Papers 424, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    11. Maschler, Michael, 1992. "The bargaining set, kernel, and nucleolus," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 18, pages 591-667, Elsevier.
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    13. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
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    Cited by:

    1. Lamberton, Donald M., 1998. "Information economics research: Points of departure," Information Economics and Policy, Elsevier, vol. 10(3), pages 325-330, September.

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    More about this item

    Keywords

    P16; D72; D80; Regulated economy; Endogenous regulation; Political economy;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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