Soft regulatory capture: dynamic auditing and other extensions

Details

Supervisors

Agrell, Per Joakim

Faculty

Louvain School of Management

Degree label

Master [120] en ingénieur de gestion

Abstract

This master’s dissertation shows the implications of some extensions to the soft capture model developed by Agrell and Gautier (2017). The base model gives an alternative to classical regulatory capture, in which capture is self-enforcing, getting rid of a flaw that traditional capture theory possesses. This promising theory however lacks the extensions that have been brought to traditional capture models over the years. The extensions presented in this master’s dissertation are the possibility of a shutdown, capture aversion by the regulator, special interests for the principal, ex-post auditing and a dynamic setting. Through mathematical analysis, it is shown that each change in assumption has a distinct impact on social welfare and on the conditions under which soft capture is tolerated.