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Fire-Alarm Signals and the Political Oversight of Regulatory Agencies

Hugo Hopenhayn and Susanne Lohmann
Journal of Law, Economics, & Organization
Vol. 12, No. 1 (Apr., 1996), pp. 196-213
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/765043
Page Count: 18
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Fire-Alarm Signals and the Political Oversight of Regulatory Agencies
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Abstract

In political settings, delegation is often motivated by differences in expertise or costs of information gathering. Even if a political principal is less well informed than a regulatory agency, she can monitor whether the agency is acting in her best interests by taking informational cues from the media, interest groups, and constituents. In response to such "fire-alarm" signals, the principal may engage in political oversight activities. This article examines how asymmetric external information flows give rise to asymmetric political control rules that introduce bias and inconsistency into regulatory outcomes.

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