Extending the Economic Theory of Regulation: The Form of Policy

Eric Bennett Rasmusen, Kelley School of Business, Indiana University
Mark Zupan, School of Business, University of Southern California

Abstract

The mutually beneficial connection between industries and the governments that regulate them is the subject of a large literature led by Stigler (1971). What has not been studied is how firms choose their desired policies from the set including entry barriers, price floors, subsidies, and demand stimulation. We take as given that government and incumbents form the supply and demand for regulation and explore the choice of political product.