Economic Of Regulation

ECONOMICS OF REGULATION
16.a. Describe classification of regulations and regulators
Classification regulation
• Statues, law made by legislative bodies
• Administrative, rules issued bygovernment agencies or other bodies authorized by the government.
• Judicial law,
Classification of regulators
• Government agencies
• Independent regulator, given recognition and have power to make rulesand enforce them.
o Some are self-regulating organization (SROs).
o Other are non-self-regulating organization (Non-SROs)
• Outside bodies, FASB and IASB.
16.b. describe the use ofself-regulation in financial market
FINRA is a SRO recognized by SEC and its primary objective is to protect investor by maintaining the fairness of the US. Capital markets
SRO that are recognition and regulatorpower, they may subject to political pressure. Its not common to have independent SRO in the civil law. Independent SRO when properly supervised by regulatory agencies have been effective in carryingout objective.
16.c. Describe the economic rationale for regulatory intervention
Regulation are require when market cannot provide efficient solution for all problems. Regulation are need when:
•Informational friction, information asymmetry.
• Externalities, optimal production of such public goods.
16.d. Describe regulatory independencies and their effects.
Regulatory capture theory,regulatory will be influenced or even possibly controlled by the industry that is regulated.
Regulatory competition (regulatory difference in jurisdiction)
Regulatory arbitrage, business shop for acountry that allow a specific behavior rather than changing the behavior. Firm use regulatory arbitrage to exploit the difference between substance and interpretation of regulation.
16.e. Describe tools ofregulatory intervention in market.
1. Price mechanism, (tax, subsidiaries)
2. Restricting / requiring certain activities, ban use chemical or require to fill 10-k report.
3. Provision public...