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When organization encounters uncertainty in regulatory times

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  • Xiao, Fenglong

Abstract

Regulatory policy is a considerable factor in organizational business strategy decisions. This article puts focus on the evaluation of the regulatory policy from the perspective of the organizational cost under uncertainty. In this paper I examine the organizational cost of policy transition in different scenarios, and consider, further, what the impact on the macroeconomic and business policy would be. Three conclusions are reached: 1. The cost of strategy adoption of organizations under regulation in a monopolized industry is only affected by their own risk tolerance of uncertainty and the cost of information; 2. when the regulation is enacted in a more competitive market, the cost of information would raise with a higher expected loss comparing with the same regulation in monopolized market; 3. If the claim of such measurement is true, the net benefit or loss of regulation is exactly the difference between organizational information cost and regulatory benefit. So the policy that guarantees the positive communication and transparent information exchange that helps to reduce the organizational information cost is necessary for an efficient regulatory policy.

Suggested Citation

  • Xiao, Fenglong, 2011. "When organization encounters uncertainty in regulatory times," MPRA Paper 36240, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36240
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    References listed on IDEAS

    as
    1. Tilman Bruck, 2005. "An Economic Analysis Of Security Policies," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(5), pages 375-389.
    2. Georges Enderle, 2010. "Wealth Creation in China and Some Lessons for Development Ethics," Journal of Business Ethics, Springer, vol. 96(1), pages 1-15, September.
    3. George Lermer & W. T. Stanbury, 1985. "Measuring the Cost of Redistributing Income by Means of Direct Regulation," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 190-207, February.
    4. Alberto Martin & Jaume Ventura, 2011. "Theoretical Notes on Bubbles and the Current Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(1), pages 6-40, April.
    5. Georges Enderle, 2009. "A Rich Concept of Wealth Creation Beyond Profit Maximization and Adding Value," Journal of Business Ethics, Springer, vol. 84(3), pages 281-295, February.
    6. Rolf H. Weber, 2010. "Multilayered Governance in International Financial Regulation and Supervision," Journal of International Economic Law, Oxford University Press, vol. 13(3), pages 683-704, September.
    7. Gary Fromm, 1981. "Studies in Public Regulation," NBER Books, National Bureau of Economic Research, Inc, number from81-1, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Regulation; Organization; Contract; Uncertainty;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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