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Regulatory agencies and regulatory risk


  • Knieps, Günter
  • Weiß, Hans-Jörg


The aim of this paper is to show that regulatory risk is due to the discretionary behaviour of regulatory agencies, caused by a too extensive regulatory mandate provided by the legislator. The normative point of reference and a behavioural model of regulatory agencies based on the positive theory of regulation are presented. Regulatory risk with regard to the future behaviour of regulatory agencies is modelled as the consequence of the ex ante uncertainty about the relative influence of interest groups in the regulatory process. The problem of regulatory risk is analysed separately in competitive network areas and in non-competitive network areas. For both cases a specific measure of regulatory risk is proposed. But measurement and compensation are different issues. The im-possibility of compensating for regulatory risk is demonstrated. Finally, the disaggregated regulatory mandate is presented as an institutional reform approach.

Suggested Citation

  • 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.
  • Handle: RePEc:zbw:aluivr:118r

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    References listed on IDEAS

    1. Knieps, Günter, 2005. "Telecommunications markets in the stranglehold of EU regulation: on the need for a disaggregated regulatory contract," Discussion Papers 109 [rev.], University of Freiburg, Institute for Transport Economics and Regional Policy.
    2. Blankart, Charles B. & Knieps, Günter & Zenhäusern, Patrick, 2007. "Regulation of new markets in telecommunications? Market dynamics and shrinking monopolistic bottlenecks," Discussion Papers 112 [rev.], University of Freiburg, Institute for Transport Economics and Regional Policy.
    3. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    4. Knieps, Gunter, 1997. "Phasing Out Sector-Specific Regulation in Competitive Telecommunications," Kyklos, Wiley Blackwell, vol. 50(3), pages 325-339.
    5. Joshua Gans & Stephen King, 2003. "Access Holidays for Network Infrastructure Investment," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 10(2), pages 163-178.
    6. G. Knieps, 2005. "Telecommunications Markets in the Stranglehold of EU Regulation: On the need for a disaggregated regulatory contract," Competition and Regulation in Network Industries, Intersentia, vol. 6(2), pages 75-94, June.
    7. Spulber, Daniel F & Besanko, David, 1992. "Delegation, Commitment, and the Regulatory Mandate," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(1), pages 126-154, March.
    8. Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, July.
    9. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
    10. Gaggero, Alberto A., 2007. "Regulatory risk in the utilities industry: An empirical study of the English-speaking countries," Utilities Policy, Elsevier, vol. 15(3), pages 191-205, September.
    11. Roger Buckland & Patricia Fraser, 2001. "Political and Regulatory Risk in Water Utilities: Beta Sensitivity in the United Kingdom," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(7&8), pages 877-904.
    12. Stewart C. Myers, 1972. "The Application of Finance Theory to Public Utility Rate Cases," Bell Journal of Economics, The RAND Corporation, vol. 3(1), pages 58-97, Spring.
    13. Chang, Mo Ahn & Thompson, Howard E, 1989. "An Analysis of Some Aspects of Regulatory Risk and the Required Rate of Return for Public Utilities," Journal of Regulatory Economics, Springer, vol. 1(3), pages 241-257, September.
    14. Weingast, Barry R & Moran, Mark J, 1983. "Bureaucratic Discretion or Congressional Control? Regulatory Policymaking by the Federal Trade Commission," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 765-800, October.
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    16. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
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    Cited by:

    1. Knieps, Günter, 2014. "Competition and third party access in railroads," Discussion Papers 150, University of Freiburg, Institute for Transport Economics and Regional Policy.
    2. M. Maegli & C. Jaag & M. Finger, 2010. "Regulatory Governance Costs in Network Industries: Observations in Postal Regulation," Competition and Regulation in Network Industries, Intersentia, vol. 11(2), pages 207-238, June.
    3. Maegli, Martin & Jaag, Christian, 2009. "Regulatory Governance Costs in Network Industries: Implicatins for postal Regulation," MPRA Paper 15309, University Library of Munich, Germany.

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