A Theory of Soft Capture

Abstract

This paper proposes an alternative model for capture that it is not based 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, saves information gathering cost and the firm enjoys higher information rents.Regulatory capture is an area that has attracted considerable attention from both academia and practitioners in legal and organizational contexts. Generally, the notion that an agency monitoring a sector in order to prevent abuse of market power or to insure non-discriminatory service provision, is unduly influenced by the very firms that it is set to supervise is per se a justified motivation to scrutinize regulatory design.Capture is often analyzed using a three-layer hierarchy composed of a political principal (government), a regulatory agency and an industry or a firm. Regulatory capture is then a side agreement between the regulator and the firm to act against the interests of the political principal. 1 When the regulatory environment is designed under asymmetric information, capture originates in the combination of regulatory discretion and information rents left to the firm (Tirole, 1986; Laffont and Tirole 1993, chapter 11).In most capture models, the firm influences the regulatory behavior by a mechanism based on threats 2 (damaged reputation) or rewards (bribes, revolving doors); see Dal Bó (2006) for a recent survey. Capture here is based on an exchange of favors between the regulator and the regulated firm. The regulator leaves extra rents to the firm, for instance by not disclosing valuable information or by lenient enforcement of regulations. In return, the firm or the industry offers a bribe 3 or the possibility of post-regulatory employment in a regulated firm (revolving doors). Taking the possibility of capture into account, the government optimally limits the regulatory discretion (Hiriart and Martimort, 2012) and/or decentralizes its objective to the regulator who is then accountable for the regulatory outcome.

Lobbying “from within”: A new perspective on the revolving door and regulatory capture

“…The revolving door at the entry stage has been largely neglected in the literature on regulatory capture (see, for instance, Levine 1990; Brezis and Weiss 1997; Agrell and Gautier 2017; Tai 2017). For example, Yackee (2014) defines agency capture as “the control of agency policy decision making by a subpopulation of individuals or organizations external to the agency” (p. 292, emphasis added).…”

Captura ou não captura? Perspectivas analíticas no estudo de políticas regulatórias

“…A definição de captura para esses autores envolve não apenas a evidência sobre o desvio do interesse público, mas também a demonstração de manipulação pelos regulados. Apesar de a produção sobre captura definir o conceito, em geral, como a troca de favores entre regulador e regulados (Agrell & Gautier, 2017), o nível de exigência de Carpenter e Moss (2013) para a confirmação do fenômeno é muito mais rigorosa do que normalmente se apresenta na literatura.…”

Jurisdictional overlap: The juxtaposition of institutional independence and collaboration in police wrongdoing investigations

“…Few publications analyze the structural aspect of oversight governance, with most focusing on the improper interference of police and executive government in external agencies (Roach, 2014;Savage, 2013). Many studies recognize the overseen agents' monopoly over essential information given the relative invisibility in street-level policing and the culture of secrecy, which shield them from internal or external scrutiny (Sherman, 1978(Sherman, , 1980Wells & Schafer, 2007; see Agrell & Gautier, 2017). Yet the consequences of having multiple state agencies offering institutional network oversight are seldom considered.…”