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Good and Bad Consistency in Regulatory Decisions

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Abstract

We examine sources of consistent regulatory decisions in a model where regulators respond to mixed incentives, including career concerns. In the reference case, regulators act as "public servants" who strive to make the socially optimal decision, given limited information and the opportunity to observe the prior decision of another regulator. Adding career concerns, such as a desire to avoid controversy or to implement a future employer’s preferred policy, tends to reduce the degree of differentiation in sequentially taken decisions, hence increasing consistency. Thus, it is possible to observe that the self-interested career concerns of regulators give rise to consistency in regulatory decision-making. This type of consistency might lead to substantial deviations from optimal regulatory policies.

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  • Flavio Menezes & Christian Roessler, 2008. "Good and Bad Consistency in Regulatory Decisions," Discussion Papers Series 376, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uq2004:376
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    References listed on IDEAS

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    1. Troy Quast, 2008. "Do elected public utility commissioners behave more politically than appointed ones?," Journal of Regulatory Economics, Springer, vol. 33(3), pages 318-337, June.
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    6. Clare Leaver, 2007. "Bureaucratic Minimal Squawk Behavior: Theory and Evidence from Regulatory Agencies," Economics Series Working Papers 344, University of Oxford, Department of Economics.
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    8. Robert Breunig & Jeremy Hornby & Scott Stacey & Flavio Menezes, 2006. "Price Regulation in Australia: How Consistent Has It Been?," The Economic Record, The Economic Society of Australia, vol. 82(256), pages 67-76, March.
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    Cited by:

    1. Flavio M. Menezes, 2009. "Consistent Regulation of Infrastructure Businesses: Some Economic Issues," Economic Papers, The Economic Society of Australia, vol. 28(1), pages 2-10, March.
    2. Flavio Menezes & Magnus Söderberg & Miguel Santolino, 2012. "Regulatory behaviour under threat of court reversal," Discussion Papers Series 472, School of Economics, University of Queensland, Australia.

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