Regulatory decision errors, legal uncertainty and welfare : a general treatment
Abstract
We provide a general treatment of the implications for welfare of various sources of legal uncertainty facing agents about the decisions made by a regulatory authority. We distinguish the legal uncertainty from the decision errors made by the authority. While an increase in decision errors will always reduce welfare, for any given level of decision errors, information structures involving more legal uncertainty can improve welfare. This holds always when sanctions are set at their optimal level. This transforms radically one's perception about the “costs” of legal uncertainty. We also provide general proofs for two results, previously established under restrictive assumptions.
Citation
Katsoualcos , Y & Ulph , D T 2017 , ' Regulatory decision errors, legal uncertainty and welfare : a general treatment ' , International Journal of Industrial Organization , vol. 53 , pp. 326-352 . https://doi.org/10.1016/J.ijindorg.2016.04.013
Publication
International Journal of Industrial Organization
Status
Peer reviewed
ISSN
0167-7187Type
Journal article
Description
Research on the current paper has been supported by the research grant 2591 of the Greek Ministry's of Education Program “Excellence in Research (ARISTEIA)”Collections
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