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Published August 15, 2017 | Submitted
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Delegation and the Regulation of Risk

Abstract

Political principals typically use low-cost "fire-alarm" signals transmitted by the media, interest groups, and disaffected constituents to monitor the activities of regulatory agencies. We argue that regulatory decision-making is biased and inconsistent if the instruments of political oversight are simple and the information flows to the principal are coarse relative to the complexity of the regulatory environment.

Additional Information

Revised version. Original dated to August 1992. We thank Kathleen Bawn, Jonathan Bendor, David Baron, Linda Cohen, Lester Lave, Mathew McCubbins, and Eric Rasmusen for useful comments. Earlier drafts of this paper were presented at the First Conference of the Society for Public Choice and Welfare in 1992, the Meetings of the Midwestern Political Science Association in 1993, Stanford University, and the University of Indiana, Bloomington. Published as Lohmann, S., & Hopenhayn, H. (1998). Delegation and the Regulation of Risk. Games and Economic Behavior, 23(2), 222-246.

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