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Corruption and optimal regulation under common agency

Author

Listed:
  • Pedro Hemsley

    (Faculdade de Ciências Econômicas (FCE), UERJ, Rio de Janeiro, Brazil)

Abstract

I show that it is optimal to separate non-benevolent regulators when regulated projects are large. Separation prevents regulators from coordinating to appropriate all of the agent's informational rent when they know the type of the latter; therefore, there is a trade-off between saving on informational rent and efficiency, since the game between the regulators induced by separation causes further distortions when compared to the allocation under one regulator. When the informational rent at stake is large due to the size of the project, separation is the optimal institutional answer.

Suggested Citation

  • Pedro Hemsley, 2016. "Corruption and optimal regulation under common agency," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 17(2), pages 199-209.
    • Handle: RePEc:anp:econom:v:17:y:2016:2:199_209
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    More about this item

    Keywords

    Regulation; Contract theory; Corruption;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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