Keeping both eyes wide open: The life of a competitive authority among sectoral regulators
Pedro P. Barros, Steffen Hoernig and Tore Nilssen
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.