Sectoral Regulators and the Competition Authority: Which Relationship is Best?

Abstract

Inspired by the creation of the new Competition Authority in Portugal, we consider the interplay between regulatory agencies with overlapping competencies; for example, a competition authority and a sectoral regulator. We analyze how authorities' incentives are affected if they can decide independently, or must follow each others' opinions, respectively, and consider how this relationship performs in the presence of institutional biases and lobbying efforts. It is found that the best results tend to be achieved when the authorities act independently of each other: the probability of coming to a decision is higher, and decisions are less vulnerable to lobbying.

Keywords: Competition authority, sectoral regulators, institutional relationship, strategic substitutes and complements, lobbying

JEL Classification: L51