Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235338 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8968
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
Firms often try to influence individuals that, like regulators, are tasked with advising or deciding on behalf of a third party. In a dynamic regulatory setting, we show that a firm may prefer to capture regulators through the promise of a lucrative future job opportunity (i.e., the revolving-door channel) than through a hidden payment (i.e., a bribe). This is because the revolving door publicly signals the firm’s eagerness and commitment to rewarding lenient regulators, which facilitates collusive equilibria. We find that opening the revolving door conditional on the regulator’s report is usually more efficient than a blanket ban on post-agency employment and may increase social welfare. This insight extends to a variety of applications and can also be used to determine the optimal length of cooling-off periods.
Subjects: 
collusion
cooling-off periods
corruption
dynamic games
experts
regulation
regulatory capture
revolving door
JEL: 
D73
D86
H11
J45
L51
Document Type: 
Working Paper
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