A Theory of Soft Capture |
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Authors: | Per J Agrell Axel Gautier |
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Institution: | 1. Catholic University of Louvain, Louvain‐la‐Neuve, Belgium;2. University of Liège, Liège, Belgium |
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Abstract: | In this paper, we propose an alternative model for capture that is based not on reciprocity but on congruence of interests between the firm and the regulator. A regulator is charged by a political principal to provide an imperfect signal for the type of a regulated firm. Only the firm can observe its type, and the production of a signal is costly. The firm can provide a costless alternative signal of lower accuracy to the regulator. In a self‐enforcing equilibrium, the regulator transmits the firm‐produced signal and saves information‐gathering costs, and the firm enjoys higher information rents. |
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Keywords: | Information regulatory capture D72 L51 |
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