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Regulatory Governance Costs in Network Industries: Observations in Postal Regulation

  • Martin Maegli
  • Christian Jaag

    ()

  • Matthias Finger

The various actors in the regulated industries relate to each other within a broader institutional framework, i.e., by way of formal and informal rules. An important role in the implementation of liberalization processes is given to regulation and thus to regulatory institutions. The rationale for regulation is its positive effect on society by correcting market failures. But regulatory intervention also causes costs which we call “costs of regulatory governance”. These costs result from negative consequences caused by regulatory requirements and from the implementation of regulatory instruments. These costs will depend upon the formal and informal rules among the involved actors, upon the allocation of property rights among these actors, as well as upon the various principal-agent or more generally contractual relationships among these actors. We distinguish between direct and indirect costs of regulation: Direct costs occur in relation with the institutional design of the regulatory framework and the behavior of actors. Indirect costs result from distortive incentives and finally turn out in an inefficient supply of goods and services. Using the example of the Swiss postal market we offer a first outline of a possible application of the framework. In this article we neither intend to quantify regulatory costs nor do we question regulation per se. We rather present a qualitative framework which helps to structure a discussion about regulatory challenges in network industries.

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File URL: http://www.swiss-economics.ch/RePEc/files/0018MaegliJaagFinger.pdf
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Paper provided by Swiss Economics in its series Working Papers with number 0018.

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Date of creation: May 2010
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Publication status: Published in Competition and Regulation in Network Industries 11(2)
Handle: RePEc:chc:wpaper:0018
Contact details of provider: Web page: http://www.swiss-economics.ch
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  1. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
  2. Frank A.G. den Butter & Marc de Graaf & André Nijsen, 2009. "The Transaction Costs Perspective on Costs And Benefits of Government Regulation," Tinbergen Institute Discussion Papers 09-013/3, Tinbergen Institute.
  3. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, Junio.
  4. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics," Introductory Chapters, in: Robert Gibbons & John Roberts (ed.), : The Handbook of Organizational Economics Princeton University Press.
  5. Jaag, Christian, 2007. "Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations," MPRA Paper 6121, University Library of Munich, Germany.
  6. Knieps, Günter, 2002. "Does the system of letter conveyance constitute a bottleneck resource?," Discussion Papers 88, University of Freiburg, Institute for Transport Economics and Regional Policy.
  7. Dassler, Thoralf, 2006. "Combining theories of regulation - Proposing a framework for analysing regulatory systems worldwide," Utilities Policy, Elsevier, vol. 14(1), pages 31-43, March.
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  9. Christian Jaag & Urs Trinkner, 2008. "Pricing in Competitive Two-Sided Mail Markets," Chapters, in: Competition and Regulation in the Postal and Delivery Sector, chapter 10 Edward Elgar Publishing.
  10. M. Finger & J. Groenewegen & R. Künneke, 2005. "The Quest for Coherence Between Institutions and Technologies in Infrastructures," Competition and Regulation in Network Industries, Intersentia, vol. 6(4), pages 227-260, December.
  11. Christian Jaag & Urs Trinkner, 2009. "A General Framework for Regulation and Liberalization in Network Industries," Working Papers 0016, Swiss Economics.
  12. Knieps, Günter & Weiß, Hans-Jörg, 2008. "Regulatory agencies and regulatory risk," Discussion Papers 118 [rev.], University of Freiburg, Institute for Transport Economics and Regional Policy.
  13. de Bijl, P.W.J. & van Damme, E.E.C. & Larouche, P., 2006. "Regulating access to stimulate competition in postal markets?," Other publications TiSEM 21b1fca3-5f00-4ffa-849d-3, Tilburg University, School of Economics and Management.
  14. John C. Panzar & Robert D. Willig, 1977. "Free Entry and the Sustainability of Natural Monopoly," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 1-22, Spring.
  15. Bonardi, Jean-Philippe & Holburn, Guy & Vanden Bergh, Rick, 2006. "Nonmarket performance: Evidence from U.S. electric utilities," MPRA Paper 14437, University Library of Munich, Germany.
  16. Williamson, Oliver E, 1999. "Public and Private Bureaucracies: A Transaction Cost Economics Perspective," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 306-42, April.
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