Working Paper: CEPR ID: DP4541
Authors: Pedro Pita Barros; Steffen Hoernig
Abstract: Inspired by the creation of the new Competition Authority in Portugal, we consider the interplay between regulatory agencies with overlapping competencies; for example, a competition authority and a sectoral regulator. We analyse how authorities? incentives are affected if they can decide independently, or must follow each others? opinions, respectively, and consider how this relationship performs in the presence of institutional biases and lobbying efforts. It is found that the best results tend to be achieved when the authorities act independently of each other: the probability of coming to a decision is higher, and decisions are less vulnerable to lobbying.
Keywords: competition authority; institutional relationship; lobbying; sectoral regulators; strategic substitutes; strategic complements
JEL Codes: L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Independent decisions by regulatory authorities (G18) | Higher total probability of success in detecting and addressing anticompetitive behavior (L41) |
| Optimal institutional design allows for independent decisions (D02) | Higher total welfare (D69) |
| Biases in the objectives of authorities (E61) | Distortion of incentives leading to suboptimal outcomes (H31) |
| Alignment of authority biases (M54) | Better welfare outcomes (I31) |