Regulatory capture : risks and solutions

International audienceThis chapter provides a survey of the economic literature on regulatory capture in network industries focusing on the solutions proposed by economic theory. We review alternative models of capture and discuss the predicted risks that these theories predict, bringing in empirical evidence where available. The bulk of the chapter then reviews the effect on capture of various decisions that policy makers face when designing the regulation of a network industry. We find that economic theory suggests a range of ways in which policy makers can reduce the risk of capture. However, alternative theoretical approaches can sometimes give opposing recommendations, and the empirical support is frequently weak. We conclude with a discussion of the need for future research in this area