DP6861 Keeping Both Eyes Wide Open: The Life of a Competition Authority Among Sectoral Regulators

Author(s): Steffen Hoernig , Tore Nilssen , Pedro Luis Pita Barros

Publication Date: June 2008

Keyword(s): Competition authority , Regulatory bias , Sectoral regulators

JEL(s): H11 , L40 , L51

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP6861.asp.asp

Competition authorities must pay attention to many industries simultaneously. Sectoral regulators concentrate on their own industry. Often both types of authority may intervene in specific industries and there is an overlap of jurisdictions. We show how a competition authority’s resource allocation is affected by its relationships with sectoral regulators and their biases. If agencies collaborate (compete), the competition authority spends more effort on the industry with the more (less) consumer-biased sectoral regulator. The competition authority spends budget increases on the industry whose regulator reacts less to more effort. The socially optimal budget corrects for distortions due to regulatory bias, but only downwards.