Regulation and rent-seeking: Prices, profits, and third-party transfers

Paul, Chris; Schoening, Niles C.

doi:10.1007/bf00173827

“…We examine, in particular, the relationship between the parameter that represents political culture (the degree of politicization of the government) and the rent-seeking rent-avoidance efforts of the interest groups affected by the proposed monopoly price, their probability of winning the contest on the approval of the proposed policy and their aggregate expected benefit. Our results can rationalize some of the empirical findings regarding price regulation in alternative political-economic environments, e.g., electricity price regulation in different states where bureaucrats are appointed or elected, Paul and Schoening (1991).…”

Section: Discussionsupporting

confidence: 83%

“…This proposition can rationalize empirical evidence on different regulation patterns in different political-economic environments. For example, it rationalizes the findings reported in Paul and Schoening (1991) that deal with electricity price regulation. In this study it has been found that electricity prices are higher in states where the regulators are appointed rather than elected.…”

Section: A Political Culture and Monopoly Pricesupporting

confidence: 78%

Political culture and monopoly price determination

Epstein

¹

,

Nitzan

²

2003

Social Choice and Welfare

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in POLITICAL CULTURE AND MONOPOLY PRICE DETERMINATION AbstractIn this paper we study the endogenous determination of monopoly price. Our proposed game of endogenous monopoly-price setting extends the literature on monopoly-price, monopoly rent-seeking contests and monopoly rentseeking rent-avoidance contests by (i) determining the monopoly price such that it maximizes a composite utility function that depends on two components: expected social welfare and lobbying efforts. The welfare component has a positive or no effect on the utility while the lobbying efforts have a positive, negative or no effect on the utility (ii) introducing the political culture of the government and clarifying its role in the endogenous determination of monopoly price. In the proposed model the single parameter representing political culture is the weight assigned to the enhancement of social welfare. Our main concern is with the study of the relationship between this parameter and the proposed monopoly price and, in turn, the rentseeking rent-avoidance efforts of the potential monopoly and the consumers and their aggregate expected benefit.JEL Classification: D72, D6.

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“…The resulting high compliance costs reduced competition for the big banks as many smaller banks struggled to comply. Interestingly, Paul and Schoening (1991) demonstrate both theoretically and empirically that the participation of interested third parties seeking monetary payoffs (unlike Òthe BaptistsÓ described above), leads to increases the prices of regulated products. It is worth noting that although third-party advocacy groups can successfully lobby for new restrictions on business, this form of regulation 4 For other examples detailing the relationship between regulation and economic growth, see Ardagna and Lusardi (2010) and Benson (2015).…”

Section: Background On the Costs Of Federal Regulationsmentioning

confidence: 92%

How Do Federal Regulations Affect Consumer Prices? An Analysis of the Regressive Effects of Regulation

Chambers

¹

,

Collins

²

2018

SSRN Journal

3

0

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This study is the first to measure the impact of federal regulations on consumer prices. By combining consumer expenditure and pricing data from the Bureau of Labor Statistics, industry supply-chain data from the Bureau of Economic Analysis, and industry-specific regulation information from the Mercatus CenterÕs RegData database, we determine that regulations promote higher consumer prices, and that these price increases have a disproportionately negative effect on low-income households. Specifically, we find that the poorest households spend larger proportions of their incomes on heavily regulated goods and services prone to sharp price increases. While the literature explores other specific costs of regulation, noting that higher consumer prices are a probable consequence of heavy regulation, this study is the first to provide a thorough empirical analysis of that relationship across industries. Irrespective of the reasons for imposing new regulations, these results demonstrate that in the aggregate, the negative consequences are significant, especially for the most vulnerable households.

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“…The resulting high compliance costs reduced competition for the big banks as many smaller banks struggled to comply. Interestingly, Paul and Schoening (1991) demonstrate both theoretically and empirically that the participation of interested third parties seeking monetary payoffs (unlike Òthe BaptistsÓ described above), leads to increases the prices of regulated products. It is worth noting that although third-party advocacy groups can successfully lobby for new restrictions on business, this form of regulation 4 For other examples detailing the relationship between regulation and economic growth, see Ardagna and Lusardi (2010) and Benson (2015).…”

Section: Background On the Costs Of Federal Regulationsmentioning

confidence: 92%

How do federal regulations affect consumer prices? An analysis of the regressive effects of regulation

Chambers

¹

,

Collins

²

,

Krause

³

2017

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This study is the first to measure the impact of federal regulations on consumer prices. By combining consumer expenditure and pricing data from the Bureau of Labor Statistics, industry supply-chain data from the Bureau of Economic Analysis, and industry-specific regulation information from the Mercatus CenterÕs RegData database, we determine that regulations promote higher consumer prices, and that these price increases have a disproportionately negative effect on low-income households. Specifically, we find that the poorest households spend larger proportions of their incomes on heavily regulated goods and services prone to sharp price increases. While the literature explores other specific costs of regulation, noting that higher consumer prices are a probable consequence of heavy regulation, this study is the first to provide a thorough empirical analysis of that relationship across industries. Irrespective of the reasons for imposing new regulations, these results demonstrate that in the aggregate, the negative consequences are significant, especially for the most vulnerable households.

show abstract

Regulation and rent-seeking: Prices, profits, and third-party transfers

Cited by 6 publications

References 10 publications

Political culture and monopoly price determination

Political culture and monopoly price determination

How Do Federal Regulations Affect Consumer Prices? An Analysis of the Regressive Effects of Regulation

How do federal regulations affect consumer prices? An analysis of the regressive effects of regulation

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