Journal
OXFORD REVIEW OF ECONOMIC POLICY
Volume 22, Issue 2, Pages 203-225Publisher
OXFORD UNIV PRESS
DOI: 10.1093/oxrep/grj013
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This article reviews both the theoretical and empirical literatures on regulatory capture. The scope is broad, but utility regulation is emphasized. I begin by describing the Stigler-Peltzman approach to the economics of regulation. I then open the black box of influence and regulatory discretion using a three-tier hierarchical agency model under asymmetric information (in the spirit of Laffont and Tirole, 1993). I discuss alternative modelling approaches with a view to a richer set of positive predictions, including models of common agency, revolving doors, informational lobbying, coercive pressure, and influence over committees. I discuss empirical work involving capture and regulatory outcomes. I also review evidence on the revolving-door phenomenon and on the impact that different methods for selecting regulators appear to have on regulatory outcomes. The last section contains open questions for future research.
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