Horizontal Reputation

Matthieu Bouvard (McGill University)
Raphaël Levy (HEC Paris)

Abstract : We consider reputation-building by a decision maker (e.g., politician) with horizontal reputational concerns, i.e., whose payoff is highest when he reaches a bliss reputation corresponding to some intermediate positioning (e.g., when perceived as congruent with the median voter). Reputational concerns give rise to multiple equilibria characterized by repositioning towards the bliss reputation. In one equilibrium, this repositioning is moderate, which benefits the market, but it is extreme in the other: the attempt to cater to the market's preferences involves overreacting (e.g., picking too extreme policies). This overreaction sometimes lowers welfare as compared to the no-reputation case. In the presence of multiple audiences, the inefficiency of the extreme equilibrium is exacerbated by the endogenous selection of inefficiently narrow and congruent audiences.

"get What You Pay For?" the Story Underneath Remunicipalizations in the Water Sector

Marion Chabrost (Université Paris 1 Panthéon Sorbonne)
Simon Porcher (Sorbonne Business School)
Stéphane Saussier (Sorbonne Business School)

Abstract : We adress the question of remunicipalization of water services in France. Gathering information on the 1998-2015 period concerning the way more than 1 200 French municipalities are organizing their water services at contract renewal time, we identified nearly 130 remunicipalization cases. Using an endogenous switching regression model in a two-stage probit estimation we found that the choice of municipalities is driven by expectations concerning price and leak: efficiency consideration are thus important drivers. However we also find evidence of mimetic behaviors suggesting that municipalities that are uniformed or not skilled enough to anticipate the consequence of their choice on efficiency might rely on observed decisions coming from municipalities from the neighborhood. (JEL: H0, H7, K00, L33)

Superregulation: Competitive Approved Private Regulators

Gillian K. Hadfield (University of Southern California)

Abstract : In this paper, I explore the potential for developing markets for regulation as a means of producing regulatory methods and technologies that are better adapted to the characteristics of a complex, digital, and global economy. This model expands the new governance concept of outcomes-based regulation, in which government monitors the achievement of established targets (such as an accident rate or release of toxins) but does not prescribe the means of achieving those targets. In standard outcomes-based regulation, regulated entities design their own approach to achieving regulatory targets. In the model I propose, private regulators compete to provide regulatory services to regulated entities; these private regulators, however, must be authorized (approved) by government, evaluated on the basis of their efficacy with which they achieve the regulatory targets. In this model, government becomes a regulator of regulators: superregulation. In this preliminary paper, I explore the possibilities and limits for such a model.