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Activists versus Captured Regulators

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  • Julien Daubanes
  • Jean-Charles Rochet

Abstract

We analyze the consequences of activism in a regulated industry where the regulator has been captured by the industry. Unlike ordinary economic agents, activists are insensitive to monetary incentives. Moreover, they are less well informed than regulators and their actions generate dead-weight costs. Yet we find that activism may increase social welfare because it disciplines captured regulators and reduces the social cost of imperfect regulatory systems.

Suggested Citation

  • Julien Daubanes & Jean-Charles Rochet, 2013. "Activists versus Captured Regulators," CESifo Working Paper Series 4444, CESifo.
    • Handle: RePEc:ces:ceswps:_4444
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    References listed on IDEAS

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    Cited by:

    1. Georgy Egorov & Bård Harstad, 2017. "Private Politics and Public Regulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(4), pages 1652-1682.

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    More about this item

    Keywords

    public regulation; regulatory capture; pro-industry bias; private politics; activism;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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