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Oversight Of Long-Term Investment By Short-Lived Regulators

Author

Listed:
  • LEWIS, T.R.
  • SAPPINGTON, D.E.M.

Abstract

Certain regulators of economic activity, like utility regulators and government procurement officers, typically serve for relatively short periods of time. The authors consider how to best motivate long-term investment in the presence of short-lived regulators. A firm's investment decision is overseen by one regulator. Whether the investment is ultimately adopted is determined by a second, distinct regulator. Each regulator is concerned with the welfare of its own contemporary population. Transfer payments between populations are limited and relevant data cannot be verified by third parties. Underadoption and underinvestment "on average" result, although overinvestment may also occur under the optimal regulatory charter. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Suggested Citation

  • Lewis, T.R. & Sappington, D.E.M., 1988. "Oversight Of Long-Term Investment By Short-Lived Regulators," Papers 325, California Davis - Institute of Governmental Affairs.
  • Handle: RePEc:fth:caldav:325
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    Cited by:

    1. Pavan, Alessandro & Calzolari, Giacomo, 2009. "Sequential contracting with multiple principals," Journal of Economic Theory, Elsevier, vol. 144(2), pages 503-531, March.
    2. Martimort, David, 1996. "The multiprincipal nature of government," European Economic Review, Elsevier, vol. 40(3-5), pages 673-685, April.
    3. Levine, Paul L & Rickman, Neil, 2002. "Price Regulation, Investment and the Commitment Problem," CEPR Discussion Papers 3200, C.E.P.R. Discussion Papers.
    4. Estache, Antonio & Martimort, David, 1999. "Politics, transaction costs, and the design of regulatory institutions," Policy Research Working Paper Series 2073, The World Bank.
    5. Martimort, David, 1999. "Renegotiation Design with Multiple Regulators," Journal of Economic Theory, Elsevier, vol. 88(2), pages 261-293, October.
    6. Shane M. Greenstein & Pablo T. Spiller, 1996. "Estimating the Welfare Effects of Digital Infrastructure," NBER Working Papers 5770, National Bureau of Economic Research, Inc.
    7. Tzioumis, Konstantinos, 2008. "Why do firms adopt CEO stock options? Evidence from the United States," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 100-111, October.
    8. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.

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