Premium
A Theory of Soft Capture
Author(s) -
Agrell Per J.,
Gautier Axel
Publication year - 2017
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12171
Subject(s) - regulator , economics , economic rent , microeconomics , reciprocity (cultural anthropology) , signal (programming language) , perfect information , imperfect , information asymmetry , computer science , linguistics , philosophy , psychology , social psychology , biochemistry , chemistry , programming language , gene
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.