Dynamic principal-agent settings with asymmetric information but no commitment are well known to create a ratchet effect. Here, the most efficient agents must be provided with extra 'information rent' as an incentive to relinquish their informational advantage over an uninformed principal; this...

We consider two aspects of the commitment problem in price regulation with lobbying the ratchet effect and the hold-up problem. We set out a dynamic model of price regulation with asymmetric information where the regulated firm can ‘buy influence’ in a lobbying equilibrium. Firms can sink...

This paper explores the similarity of the underlying economic problems that lead to the establishment of (a) independent central banks to operate national monetary policies and (b) independent regulatory agencies for telecommunications and other utility service industries. We show that, in both...