Regulation is itself not a perfect process. The regulators have an imperfect knowledge of the markets that they regulate and will make mistakes. Why regulate? is not a trivial question where imperfect competition exists and the deficiencies of regulation have become obvious or its cost excessive. Some American state regulators have opted for minimal interference or even none, leaving the efficient functioning of the market to be settled by such factors as the threat of entry, the behaviour of competitors, peer group comparisons and the wish of the dominant operator to avoid legal and regulatory action over market abuse. Practical problems arise in two regulatory areas. The first concerns the objectives of the regulators, arising from their position as agents. The second is whether their actions have unintended consequences which are perverse.
Practical problems with regulation, Page 1 of 2
< Previous page Next page > /docserver/preview/fulltext/books/te/pbte041e/PBTE041E_ch13-1.gif /docserver/preview/fulltext/books/te/pbte041e/PBTE041E_ch13-2.gif